A Line In The Sand Moment - John Rothe | Portfolio Manager, Quant, Tech Geek, And Sometime Superhero To My Kids

A Line In The Sand Moment

Yesterday I mentioned the flag pattern we are seeing form in the US equity markets -see Tread Lightly My Friends. In addition to the flag pattern, the S&P 500 index is quickly approaching the 50 day moving average. A point where short term traders may sell recent gains and short the market again:

50 day moving average

If the market breaks above the 50 day moving average instead of turning back down, it is an indication that traders think the market should move higher – possibly hoping for a strong earnings season and a resolution to the European crisis. As a result, we may seeing a quick rally up to the 200 day moving average. Don’t forget a good portion of daily trading volume is computer driven. Someone has to program buy and sell signals, and the 50 day and 200 day moving averages are used frequently as buy/sell points.

Lately Fridays and Mondays have been bearish for the market, we will have to keep an eye out to see if the same pattern emerges – or if the majority of market participants want to market to move higher.

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