While there are numerous signs which can indicate the possible transition from a bear market to a bull market, the following two milestones are of uppermost importance:
- When the 50-day moving average crosses, and more importantly holds above, the 200-day moving average,
- When the slope of the 200-day moving average turns positive.
During an established bull market, a good way to eliminate less attractive markets or investment alternatives is to discard those that have a negatively sloped 200-day moving average. At the end of a bear market, it takes time for a market to send signals of the potential staying power of a rally via a positive change in the slope of a 200-day moving average. As shown in the chart below, even though stocks began to bottom in mass in March of this year, we only started to see positive changes in the slopes of 200-day moving averages in the last two weeks.
http://www.ciovaccocapital.com/sys-tmpl/200turnuppublic/
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