For those of you who follow market indices and technical analysis, the 200 day moving average (DMA) is an important technical and psychological barrier. May 20th, 2010 marks an important technical break in market analysis as the S&P 500, Nasdaq and Dow Jones indices have all fallen below and closed below their 200 DMA.
Breaking above or below the 200 DMA usually indicates a major market moving swing to come. With much of the market now dominated by computerized trading and stop losses set at important moving averages, one should tread this market with caution. Instead of support, the 200 day moving average now becomes a resistance level.
Breaking above or below the 200 DMA usually indicates a major market moving swing to come. With much of the market now dominated by computerized trading and stop losses set at important moving averages, one should tread this market with caution. Instead of support, the 200 day moving average now becomes a resistance level.
That's why I put all my 401K into cash earlier this year. With so much uncertainty surrounding the current global political and economic climate, my motto is when in doubt, stay out. Everyone has their own threshold for risk. For me, my risk tolerance is at an all time low, especially since I see nothing that suggests a sustained global economic recovery is in place. Under normal circumstances, I would say stay long and strong. I don't think we are living in normal circumstances.
The velocity of money has plummeted, the vast majority of exotic interest only and ARM mortgages are going to be reset in the later half of 2010 and all of 2011, new mortgage applications at 13 year lows, mortgage delinquencies are expected to double from 5% to 10% in the next two years and 5 million more homes are expected to be thrown onto the market that is already down 30% or more. Oh yeah, and unemployment applications rising. I see nothing to suggest a sustained economic recovery is in order. We live in uncertain times of a magnitude never before experienced by multiple generations.
