7 replies to this topic

[spielchekr]

To keep the 50ma from sloping upward (and rather steeply at that), bears must close below the dashed red line. In fact, they must duplicate the swoon from 50 days ago, beginning tomorrow, just to keep the 50ma slope flat. Bears must now do even better than that to continue the downward slope. Without inflicting a pretty deep gouging today, good luck with that. That is Buy The Dip Valley in front of you.
http://stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=0&mn=3&dy=0&i=t75561778108&a=108769298&m=o&r=6265.png

Edited by spielchekr, 02 October 2007 - 11:18 AM.

[relax]

Hi!Thanks for the interesting chart But could please explain the 1,50 MA graph First, what does it represent - 50-day MA moved in time? what does "1" in the settings represent? Second, the graph shows a path into november - is this something the 1,50 MA expects or... Cheers

[borland]

I assume his chart is 100 days, and he's assuming the last 50 day period of price will repeat in the coming 50 days. Doesn't look like the last 50 days of price pattern match the previous 50 days (as shown by the 50 day delayed 1MA for that period). Good luck with the trade.

Edited by borland, 02 October 2007 - 01:54 PM.

[spielchekr]

That assumption couldn't be further from the truth. In fact, I'm using the unlikelihood of such a "fractal" thing occuring to express how difficult it will be to keep the 50ma flat, let alone sloping downward. It is true that the dashed line is nothing more than closing price from 50 days ago. What I always seem to have a diffucult time with is explaining this: When price crosses a 1,(x) ma line, the (x) ma is immediately affected with a change of slope direction (from + to - if prices crosses below the 1,(x), and visa versa). To some people, the + or - of a ma slope determines if the trend is + or -. It's just that simple. In a simple moving average, there are only 2 dynamics that cause the degree of slope to change. The oldest day gets dropped, and the newest day gets added. Absolutely no other days in the average change the degree of slope from one day to the next. When the new day rises more than the old day it's replacing, the slope gains pitch ("momentum"). And should a new day cross above the closing price of the old day, the slope magically turns from a negative pitch to a positive one. But there is really no magic at all to it, is there? The magic is an illusion that's often exploited as "momentum", and many people don't understand the simple mechanics of simple moving averages. Looking at the current chart, the 20ma will go up now even if price goes down, as long as price remains above the dashed line. Even if I can't explain it well enough to be understood, all you have to do is observe a live chart the moment when price crosses a 1,(x)ma line to see the slope of the (x)ma change from descending to ascending (or visa versa).

[spielchekr]

Here's a very simple way to understand it. Using the example of a chart set up a chart with 1,50 ma and 50 ma, IF price was to exactly duplicate the moves from 50 days ago, the 50ma line would be a perfect flat line. A positive price deviation from the prices 50 days ago causes a like positive deviation from the current 50ma slope. The mirror image effect happens for negative deviation.

[borland]

OK, thanks for the explaination. I get your point about the 50MA likely to go up. But price going forward can also head down with 50MA going up. So with the market over extended on a price momentum basis, your not showing a buy the dip sure thing.

[spielchekr]

OK, thanks for the explaination.

I get your point about the 50MA likely to go up. But price going forward can also head down with 50MA going up.

So with the market over extended on a price momentum basis, your not showing a buy the dip sure thing.

Well, how about "buy the crater"? I think it could be manipulated into a good shakeout, and all the while the 50ma level remains stable. In other words, "somebody" could let prices fall anywhere above the red dashed line and yet feel comfortable that no techical damage would be done to the "all-important" 50ma. Just some criminal thinking, that's all it is.

[spielchekr]

Here's a very simple way to understand it.
Using the example of a chart set up a chart with 1,50 ma and 50 ma, IF price was to exactly duplicate the moves from 50 days ago, the 50ma line would be a perfect flat line. A positive price deviation from the prices 50 days ago causes a like positive deviation from the current 50ma slope. The mirror image effect happens for negative deviation.

Actually, let me rephrase that a little better. IF price was to exactly duplicate the price movement from 50 days ago, the slope change of the 50ma line would be inert. Currently, it's (almost, not perfectly) flat. So in other words, exact duplication of price movement (the day-to-day changes, not the price numbers themselves) makes the sma slope steady/inert/unchanged, whatever that slope may be.