I am not a big fan of
200 day MA stuff,..but found this study by SentimenTrader to be worthwhile.
This study was re-posted in today's TSP daily (free) letter: http://www.tsptalk.com/comments.html
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The fact that the S&P is now trading below the 200-day SMA after having
moved above it a few weeks ago, may be a bad sign for the intermediate-term.
The following is from our friends at SentimenTrader.com:
Now that the 200-day average has "failed" by the S&P crossing
back below it yesterday, let's revisit it. Let's go back to 1928 and look for
any other time the S&P crossed above its downward-sloping 200-day
average, held above it for at least five days and hit at least a one-month
high, then fell back below.
Since the late 1920's, there were five
other occurrences:
![Image]()
...In every case but one, the S&P
ultimately went on to violate the low that preceded the rally above the
200-day average. And that one exception, in 1947, we saw the S&P do a
"full" re-test of the low, holding just a few cents above the low
prior to the big rally above the 200-day average.
With only five precedents, we obviously don't have enough information to draw
a statistically valid conclusion. But these analogs do help show what's
possible, even what's likely, under somewhat similar technical circumstances.
-- Courtesy of http://www.sentimentrader.com