Friday, January 27, 2012

@AllAmerInvest, The Trend of the Market Remains UP, Chart

The uptrend in the S & P 500 continues.

All American Investor

One thing you should notice when you look at the SP 500 chart below is the slope of the 40 day moving average (green line). The slope is trending up. It is the slope that is most important, not the absolute value of the moving average.

The market should now be able to take downside attacks. Expect the market to find good support if the market comes back to, or near the 40 day moving average. This is where you want to consider buying the market.

Obviously, the market is still vulnerable to event risk from Europe.

The slope of the 200 day moving average (red line) has not yet turned up. This is of some concern. A turn to the upside on the 200 day is going to put enormous pressure on the shorts, and it is likely they will have not choice but to start covering or reducing risk.

You will also notice that the market is trading at the top of the shaded area. The lines at the top and bottom of the shaded area equal +2 and -2 standard deviations over and under the Line.

Resist the temptation to all nutty and make short term buys, or trades when the market is at or above 2 standard deviations above the line.

We are not there yet, but this market is starting to remind of a "real good" bull market.

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Original content Bob DeMarco, All American Investor