Stock Market Surfing the 200 Day Moving Average Wave

Well, I am fresh back from my holiday in beautiful Italy and the market has had quite the paranoid / volatile week.

Most of the US indices have found support at their 200 day moving averages.  If you do not know the importance of this indicator read the article I wrote regarding key indicators for the long term investor or watch this video?

Also, I would never say I told you so, but on   April the 19th and May 12 I wrote about the market showing signs of weakness.  It’s all in the indicators.

The relevance of the 200 day moving average is important.  WHY?  Because the professional traders and amateurs alike think it is.  There can be no other reason.  You would be surprised at how many pro’s cannot think beyond the 200 day moving average as the cornerstone for their technical analysis.  That’s why it is important.  If enough people believe in it, then it becomes the truth.

The indices that are hovering above or at the 200 day moving average:

• Dow Jones Transport Index (DJ-20)
• Dow Jones Industrials (DJ-30)
• NSYE Composite (NYSE)
• Russell 3000 (RUA-X)
• S&P Small Cap 600 Index (SML-X)
• S&P 500 (SP-500)
• NASDAQ Composite index (COMPQX)
• NASDAQ 100 (NDX-X)

What is important here is the breaking of the 200 day moving average.  If the indices en masse break down through this level significantly then you need to be short, or not be in the market.  I have not been long in the market since April therefor have little of the emotional stress you may be enduring at the moment.

TIP:  Plot the 200 day simple moving average on your chart.  Look at the major indices and check it regualarly.

The 200 day moving average is a psychological barrier, a break through it is significant.  Now with the Greek bailout all but official and the slow-down in the US market recovery already priced into the market I do not expect the 200 day moving average to be significantly broken or the market to retreat further.

In fact the trading day Friday 24th June 2011 was important as Volume was extremely high on all the major indices.  This indicates what is called a blow off bottom, e.g. a potential turnaround.  Only time will tell if this turns out to be reality.

At this point I am back in the market, why?  Because my trading system has flagged two stocks to buy.  The system flags buys only 30 times per year and returned over 200% in the last 12 months.  This sytem is not a complex set of custom mathmatical algorithms, the knowledge to create a a great system like this, all lies within the book and training course I have designed to teach you how to trade and how to win in the stock market.  Want the knowledge?  Liberated Stock Trader PRO

Further articles on the system will be released in the future.

Knowing which way the market is moving is important, but knowing which stocks to buy and when to buy them is critical to your success.