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200-day Moving Average

I thought I'd show you a chart of the S&P 500 over the last 20 years in comparison to its 200-day moving average.

I have circled the various points where the index crosses the moving average in an upward direction. You can see that when that happens, it is a pretty strong technical signal that the market is fully into recovery mode.

I've also put a couple of black arrows on the chart to show you that markets can easily run up to the 200-day moving average and fail to sustain a cross above it.

As we are looking at 2009, I expect that we will see a move up to the 200 day moving average sometime in the next few weeks – maybe even as late as April/May give how far we are below it right now. But we will not likely see a sustained advance above it; in other words, it will be like one of the arrows, not the circles, on its first assault of the average.

Eventually, we will cross the average and make a move higher, but there will need to be some positive catalyst (like maybe some positive news in the housing crisis) for that to happen. For now, we plan to be opportunistic using trailing stops to capture the upward move to the 200-day moving average.