![]() But we can take it a step further and see how the members of the S&P 500 index are faring against their own 50-day moving averages.Īs of Thursday's close, 57% of the S&P 500 members were trading above their 50-day moving average. That's up from about 3-5% in mid-June. So, in one month, over half of the S&P 500 stocks have gone from below their 50-day to above their 50-day. ![]() The price breaking above the 50-day moving average tells me that the short-term picture has improved to the point the S&P 500 has broken above this key trend barometer. You see, if I'm trying to look out a couple months as an investment horizon, I want to be focused on the longer-term trends (which I like to capture with my Market Trend Model ), but also understand the shorter-term fluctuations. So, when the S&P 500 broke above the 50-day moving average this week, I definitely took notice.įor me, the 50-day moving average is a key component to understanding trend. The 50-day moving average represents about 20% of the trading days in a calendar year, or about two and a half months. Quite simply, when the price is above its average price for the last couple months, that's bullish.īut here's the catch: it's all about time frames. This has helped me to avoid some of the temptation of behavioral biases like confirmation bias and endowment bias and focus more on the evidence that the markets provide. I've learned that this game is all about identifying a key level, price, signal, or what I call a "line in the sand," at which point you agree to revisit your investment thesis. ![]() For the last couple months, when someone would bring up some bullish argument, my response would usually be something like, "Sure, but we're still below the 50-day moving average."
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