The Next Test...
The rally from the December lows has been nothing short of impressive. The first technical test at the prior break down levels (dotted line in charts below) have now been surpassed with little fight from the bears.
Now it's on to the much talked about and watched 200 day moving average.
The DJIA (DIA) is the only major index that is above it's 200 day moving average and has closed above several times. This is a bullish sign but it would be more bullish if the S&P 500 (SPY) and Nasdaq 100 (QQQ) where to follow suit, sooner rather than later.
In Canada it's a similar story with the TSX Composite Index failing at it's first attempt to get back above the 200 day moving average.
Here is what it looks like. Charts of the DIA, SPY, QQQ and TSX...
Why does the 200 day moving average matter?
It matters because it's been widely watched and recognized for years by traders and analysts to determine the general market trend. Because of it's popularity one could reason that it can become a self-fulfilling prophecy as to the bullish or bearish tone of investors.
It has also proven to be a strong area of support since mid 2016 and right now it's important to see how price reacts to it.
Will the 200 day moving average become resistance moving forward signalling the beginning of a prolonged bear market? Or will price get back above and convince more bulls to get back on board?
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