Today marks the first precise test of the 50-day simple moving average on the S&P 500 Index since New Year’s Eve 2012. The 50-day m.a. on a major index like the S&P is a widely-watched reference point, even by non-chartists.
The reference point is still clearly rising, which means more often than not we should avoid turning aggressively bearish–Sure, we can take shots on the short side here and there, but usually short-selling aggressively (comprising more than 50% of your portfolio) is best reserved for when the indices are in established downtrends.
Observing the updated S&P daily chart, below, note that we are probing the key 1548 support area. A close below would hurt the bull case and could easily call for a deeper price correction. Also note the S&P could fall further before hitting its lower Bollinger Band, meaning we are not dramatically oversold here currently.
Finally, moving averages are best used as reference points, a phrase I have uttered many times over the years. Thus, we are looking to gauge how strong or weak buyers are against the first test of the 50-day in 2013. In other words, this should be an excellent litmus test.
So stay nimble, open-minded, and on your toes.
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