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SP500 50/200ma death cross forming

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posted on Jul, 5 2010 @ 03:40 AM
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If you watch the markets you probably already have seen this.



You probably already know this. If you don't, it's a warning of a downturn.




posted on Jul, 5 2010 @ 03:41 AM
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reply to post by dbriefed
 


Can you elaborate some more on what the graph means? to me its just squiggly lines going left to right...

im not trying to be funny, i dont know what it means...



posted on Jul, 5 2010 @ 03:44 AM
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Ok, I really am trying not to follow downturns at the moment as I feel they herald trouble/conflict in the short term.

But, given some things brewing internal/external issues, can you explain to a layman (I usualy play with currencies) what this means?

Many thanks in advance


Edit to add: play with currencies in my own little bubble


[edit on 5/7/10 by thoughtsfull]



posted on Jul, 5 2010 @ 03:48 AM
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Sure. The chart shows the S&P 500. The green line is the 200 day moving average of the S&P 500, the red line is the 50 day moving average of the S&P 500. When the 50 day moving average drops below the 200 day moving average, it is an indicator of a downturn or contraction in the market.

The 200 day moving average also becomes the upwards line of resistance.

www.investopedia.com...

www.tradingday.com...



posted on Jul, 5 2010 @ 04:34 AM
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reply to post by Dbriefed
 


I had 19 credit hours of economics under my belt when I graduated college, and still am routinely educated by you in this forum, my friend. Thank you for consistantly explaining the intrinsics of the market and various indicators.

I saw a mention of this on Thursday (though it was very dumbed down by Marketwatch and was simple referred to as "the 50 day average dropping below the 200 day" no mention of a death cross). The government analysts were pushing the idea that this doesn't always mean a downturn, we're in "new" times and the classic indicators are meaningless, etc. After doing some research and asking about various conditions this week, I am believing that the economy is certainly heading right back towards 2008 territory. If this doesn't come to pass, I'm guessing all the traditional market indicators really are useless now and the man who develops a reliable new method of predicting growth/downturns accurately will become very, very wealthy.



posted on Jul, 5 2010 @ 10:13 AM
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Thank you!


Be aware that Yahoo finance has a bug. DOW charts for periods over 5 days are showing todays DOW at 8,300 instead of 9,686, both graph line and mouseover tracking dot. Google doesn't have this problem, so I checked the 50/200 on Google and their graphs also verify the death cross crossover.

Backwards in history death cross dates and S&P 500 impact:

Dec 10, 2007 - 1,467 dropped to 683 (-53%) in 5 months
Oct 30, 2000 - 1,426 dropped to 800 (-43%) in 1 year
Jun 22, 1981 - 132.56 dropped to 103.85 (-21%) 1 year 2 months
Apr 9, 1973 - 112.08 dropped to 62.34 (-44%) in 1 year 5 months
Mar 10, 1969 - 98 dropped to 76 (-22%) in 1 year 2 months

There are a few occasions in a bull market where a contraction didn't happen.



posted on Jul, 5 2010 @ 11:06 AM
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ok so lets assume that i am a complete layman

none of what you said makes sense to me, would it be possible to explain further,

forgive my ignorance in these specifics.



posted on Jul, 5 2010 @ 11:38 AM
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I`m still confused as to how some numbers & graphs & some data in a computer will cause our country to collapse. Unless those numbers are saying how much food/oxygen is left and its not enough for everyone to survive. But then, I know nothing of such things... I`m BELOW poverty (by the standards of my country, im sure by the standards of some countries i am at least middle class.) But really, how do these numbers effect our ability to survive with the resources available on the planet. Or is this only something that effects people rich enough to "play the stock exchange"? My life has not changed much, even with the dip in `08 and all the unemployment problems, overall my ability to survive and to have a happy life was not effected except that i felt bad for all the people who seemed to be greatly effected, or at least they made a lot of noise so I assumed they must be being greatly effectedm.


 
Posted Via ATS Mobile: m.abovetopsecret.com
 



posted on Jul, 5 2010 @ 01:33 PM
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There are many warning signs in the technicals at the moment, everything is looking very bearish. We have also just completed a huge head and shoulders formation so markets are expected to go much lower. However, the market is very oversold right now so don't be surprised if we see a bounce. But after that bounce it's headed back down again.



posted on Jul, 5 2010 @ 03:59 PM
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Originally posted by burdman30ott6
reply to post by Dbriefed
 


I had 19 credit hours of economics under my belt when I graduated college, and still am routinely educated by you in this forum, my friend. Thank you for consistantly explaining the intrinsics of the market and various indicators.

I saw a mention of this on Thursday (though it was very dumbed down by Marketwatch and was simple referred to as "the 50 day average dropping below the 200 day" no mention of a death cross). The government analysts were pushing the idea that this doesn't always mean a downturn, we're in "new" times and the classic indicators are meaningless, etc. After doing some research and asking about various conditions this week, I am believing that the economy is certainly heading right back towards 2008 territory. If this doesn't come to pass, I'm guessing all the traditional market indicators really are useless now and the man who develops a reliable new method of predicting growth/downturns accurately will become very, very wealthy.


LOL.

I started in this business in 1984 with Merrill and then they had a Chief Market Analyst by the name of Bob Farrell, who was basically the elder statesman of Wall Street.

Any time some sector of the market started acting up he would come out with his standard statement that went something like this:

"Once again we have the market pundits trying to tell us why this time is different, but I am here ladies and gentlemen to remind you, NO IT'S NOT."

And he was never wrong.

[edit on 5-7-2010 by leo123]



posted on Jul, 5 2010 @ 04:04 PM
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reply to post by doctor j and inmate c5779
 


The reason numbers or trends can cause a collapse is because traders trade on the charts. Chart technicals affect traders and computer programs.



posted on Jul, 5 2010 @ 05:29 PM
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Hello everyone. I will explain this very easily for you all. The reason those of us on Wall Street pay attention to 'moving averages' is because it smooths out the volatility of the markets. It takes the day to day price movement out and gives you the 'moving average' value of whatever stock market index you are looking at. What the market does for a week or month isn't the overall trend or direction of the market. If both of the moving averages are making higher highs, that is very bullish for the market. Especially if the 50 moving average is at a higher value than the 200 day. So if the shorter term moving average (50 day) moves lower than the longer term moving average (200 day) it means that the current market is leading us lower. The markets are breaking long term averages and hence the market trend becomes bearish.

Same can be said when the 50 day moving average broke ABOVE the 200 day. It was a very very bullish signal to invest. What the OP is showing is the counter indicator, which if it occurs is a very bearish signal that is both rare and accurate.



[edit on 5-7-2010 by johnny2127]



posted on Jul, 7 2010 @ 12:09 AM
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reply to post by johnny2127
 

Thanks Johnny, I love it when professionals chime in.


Keeps us true.



posted on Jul, 8 2010 @ 12:40 PM
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Death cross created. Some articles claim the metric is useless now, and the rally creates doubt in the belief in the metric. However if true, the S&P 500 which is now about 1,028 has a 200ma ceiling of 1,111 today and a long term downward trend for the next 6-12 months, or more.

Wish I knew more about this stuff and had more confidence in it. I could have retired by investing in 20/20 hindsight.



posted on Jul, 8 2010 @ 03:00 PM
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reply to post by Dbriefed
 


50/200 cross is a bad indicator for trending markets and a good one in consolidated choppy markets.

Ideally, if you were a professional and had the bankroll you would have multiple systems in play for these situations where one is buying this dip and the other is selling. There is never one "for sure" way to play any market.

But the real point is, can anyone honestly say this market can really go down too much more on 0% Fed Funds Rate? You are kidding yourself. With something fundamental like that you can basically eliminate one half of the equation. Maybe even one more fierce dip while we are in this range we created, then of course it is going back up.

Do you see interest rates changing anytime soon with no inflation? I doubt that as well. So while I usually only deal with technicals this situation we have got ourself in doesn't really scream another "crash" to me personally.

If you ask me the best bet is in bonds buying 1- 10 Year Note Futures Contract and Selling 1 - 30 Year T-Bond contract. Almost at historically high levels in a historically guaranteed, never not once failed situation back to the linear mean of a factor 1.15 area. Right now sitting +1.3 - 1.4 area. If it is possible to load an excel sheet on here I can show this if anyone is interested. Bonds yield a lot of opportunity and not many are knowledgeable about those markets.

btw - it hasn't even crossed yetHere hopefully this works



[edit on 8-7-2010 by GreenBicMan]



posted on Jul, 8 2010 @ 03:09 PM
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dont beleive in the market..... the markets are manipulated
yesterday dow gaining 200 pts today 100 .. all other market are crashing
country in the world are in the brink of crashing because of the economy

a few months ago the dow dropping 1000 in a mather of seconds
and then retreiving 800 in another mather of seconds
its impossible
today the market should be very low and its not
something or someone is tempering with the computer
it can be very easy its just numbers displaying at a screen afterall



posted on Jul, 8 2010 @ 03:33 PM
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reply to post by GreenBicMan
 
Thanks, good feedback.

I don't trust the interest rate as an economic fundamental to watch since rates are adjusted to respond to the economy, the economy doesn't necessarily respond to rates. Risks of lending money for depreciating assets are high and rates are low, so there's not enough ROI to lend. The fundamentals I'm watching are property values and employment. Both continue to contract, and the burden of paying off deficit created in the last two years is an additional drag on economic growth if it doesn't crush growth entirely.

On the graphs I'm looking at a period longer than 3 months, (1yr, 2yr) and the cross is there in those views. On Google Finance the cross is there on a 3 month window. What's the best view?

[edit on 8-7-2010 by Dbriefed]Fixed Google Finance link, added screenshot below.



[edit on 8-7-2010 by Dbriefed]



posted on Jul, 8 2010 @ 04:41 PM
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reply to post by Dbriefed
 


You linked to a weekly view. If you look at

1) DAILY

2) 50 EMA

3) 200 EMA

that is what they are talking about.

The most important thing about these though are their acceleration. If you google acceleration principle or something in google you will see how people judge average prices more by the acceleration of these indicators.

Remember, all this lags price though in the first place. So for a leading indicator some people like to use Imochoku (or something weird it is called) which tries to display a leading indicator of price. Like I said, you should be diversified and historically test everything before you even jump into a situation like this.

I am not sure how you can judge unemployment for a leading indicator of markets and economy.

The fed funds rate at this level is screaming to buy the market.
Buying under 2 preceeds an excessive elongated bull run every time in history


Historically speaking, Fed Funds Rate south of 2 is an extremely huge buying opportunity. There will be no crash while we are at 0% rates. To me, that is as close as something I would put my life on if I had to do so. You HAVE to acknowledge the Fed Funds Rate here IMO. No other way to look at it.



posted on Jul, 8 2010 @ 07:31 PM
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reply to post by GreenBicMan
 


Seems to me a self fulfilling prophecy. When the markets move towards this "death-cross" the investors or the computers will see it as a historical trend and sell off anyways? Unless of course the market is Bullish, but this one isn't... I don't know what it is, there is no word for Stagnate in investor terms?

The Consumer base is still hurting, and it's hurting exceptionally bad.. if anything could bring down the market and the economy in general, it will be fundamental economics.. That Capital alone cannot support a Capitalist system, it needs a continued cycle of wealth from the lowest rungs of society to the highest.

However I agree with you that it seems unlikely that another crash could happen, at least by crash I am assuming a 20+% drop in a very short amount of time. There is far to much liquid capital floating around, so much so that if the Market did fall 20+% it would be bought up for pennies on the Dollar in a matter of days. IMO, the markets themselves are secure for now, perhaps volatile, and perhaps not gaining much ground, but secure nonetheless.



posted on Jul, 8 2010 @ 07:46 PM
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reply to post by Rockpuck
 


There is so much god damn competition in the marketplace right now, to me personally the best opportunities right now seem to be looking at things for a daily perspective. That or arb'ing interest rates to the mean.

Out of several dozen, I only have 1 strategy on the 1 minute level that has continually held up over time - > present. This strategy trades close to 3,000 times per month though and only makes after commissions less than a 5 dollar bill.

I am guessing this strat will fail as well if I keep running it over the next couple years.

The rest are all hourly and daily long term strats.

I believe the day of "day trading" is leaving soon because what you are seeing are representations of >x amount of chaos pastpresent. The closer to present, the more the chaos.

I had a point I was going to make off of this but I forgot it while typing so if I remember I will add later. But your statement is correct because there is simply an overabundance of liquidity at all major S/R longterm lines and everyone is looking to buy .005% less than the other asshole.



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