200-Day Moving Avg as Support So Far

We are in a reversion to the mean business folks, and sometimes a reversion slightly beyond the mean. I like to use the of the 200 day Simple Moving Average as a gauge for the longer term direction of the markets. The slope is important as well. When stocks are trading above an upward-sloping 200 day moving average, then I look at that as an uptrend. The opposite is the case when they are trading below downward-sloping 200 day MAs (like 2008).

Since the summer of 2009, these major averages have been trending with and above their upward sloping 200 day moving averages and so far they have held as support over the last week. I don't want to imply that all is clear and we are out of the woods just yet, because most of these indexes were pretty much where they started the year just a week ago. But so far, the Dow Industrials and Dow Transports didn't even touch the 200 day averages showing some relative strength vs the others. The S&P500 and Russell2000 each kissed the average and rallied hard like if it was a trampoline. And the Nasdaq100 was the only one of these that temporarily breached the 200 day, but recovered viciously yesterday in the single best day of the year for the tech-heavy index.

To the Charts:

Dow Jones Industrial Average 6 Months

S&P500 6 Months

Dow Jones Transportation Average 6 Months

Nasdaq100 6 months

Russell2000 6 Months

These major averages have held support so far. Times like these can be used as nice entry points with good risk/rewards for individual stocks acting in similar fashion. Check your favorite names and see how they're behaving relative to the mean.