Saturday, 07/24/2010

Author: Joao-D
Email: joaod2009@gmail.com

Standard & Poor's 500 Index (S&P 500)

Update
General market conditions analysis

Question:
Could you explain how you interpreted those moving averages on the last chart?

A question prompted me to make a quick review about 'death cross' , “golden cross”, “bear market” and
“bull market”.

The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential
Moving Average (EMA). The only significant difference between the various types of moving averages is the
weight assigned to the most recent data.
Usually I use the Exponential Moving Average (EMA) in my charts.

The 200-day moving average shows the average price over the last two hundred days.
The 50-day moving average does the same but for the last 50 days.

“Death cross “ is a crossover resulting from a 200-day moving average breaking above its 50-day moving
average.

“Golden Cross”is a crossover involving a 50-day moving average breaking above its 200-day moving
average.

“Bear market “ occurs when:

- Price is below the 200-day moving average.

- There is a sequence of lower highs and lower lows.
-”Death cross “ occurs.
- Price decrease more than 20% and over at least a two-month period.

“Bull market” occurs when:

- Price is above the 200-day moving average.

- There is a higher highs and higher lows.
-“Golden Cross” occurs.
- Price increase more than 20% and over at least a two-month period.
Let´s look at the daily chart, which gives us a short-term (days to weeks) view of the market.

Daily Print

We can see :

- the golden cross and the death cross.

- higher highs and higher lows (blue points)
- lower highs and lower lows (red points)
- new sequence of higher high and higher low (blue points)
Now, let´s look at the weekly chart, which gives us a medium-term (weeks to months) view of the market.

Weekly Print

We can see:

- the death cross

- higher highs and higher lows. (blue points)
- lower low (red point) and rose again
Finally, Let's look at the monthly chart, which gives us a long-term (months to years) view of the market.

Monthly Print

In the last article I write “the red moving average is a support.”

Now, we can see the same.

What is important ?

The red moving average continues a support.

The new sequence of higher high and higher low is a positive sign.
Let's see if this still remains.

In the last article I write “ Still, there are mixed signals, the blue moving average (EMA-50) crossed
the red moving average (EMA-200), which usually indicates a bear market. I believe this signal will
be false. ”

I still think the same. I do not interpreted the death cross in the daily print as the end of the bull market.