Battle At The 200-Day Moving Average

This post is by Howard Lindzon from Howard Lindzon

The markets are throwing it all at the ‘youts’ in 2022.

This has been the first and a very nasty bear market for them.

They heard the word ‘capitulation’ for a few months and it never came.

All summer they heard about inflation and maybe even looked up the term ‘CPI’.

The last few days and onward they will hear endlessly about the 200-day moving average. If you don’t know what that means or what everyone is talking about, click here.

I have been talking about the 200 day for a few months because all the major US indices have traded well below them. I get cautious when we cut below that moving average. Investors and traders have long treated it as a major trend line for stocks.

Yesterday, the S&P continued it’s climb from the June lows and touched the 200-day moving averages so of course we are all talking about it.

I have no idea what happens next, but the ‘experts’ doubt it will be easy to break this downward trend in the index.

The chart that caught my attention yesterday was this one which of course because it brings back memories of 2008. Have a look:

I am not doing anything differently today, but I am not ignoring the price action that happens as we bang around, up or down this moving average over the next few days, weeks or months.