Short and Sweet Moving Average Analysis - It’s Just the Price!

By Daniel at 23 January, 2010, 6:23 pm

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This week’s move on the DJIA of 437 points down has caused the SMA25 day to have a distinctive downslope. This is the first technical indication of a major change in market direction. A change from positive to negative in the slope of the SMA25 is a rare event. One or two more weeks of losses on the Dow will solidify this downtrend.

The classic Bollinger squeeze the last 2 weeks of December was followed by a fake move up that ended on 1/19. This classic move signals the beginning of a new long term trend (months).

P/E’s are out of line - Dow 17 - Nasdaq 47 - SP500 70 - Russell 2000 nil –Clearly the market has valued big companies a little high, but earnings for the vast majority of stocks are just not there. Bull markets are not built on a foundation of no earnings. P/E’s will not be normal until a broad base of smaller issues demonstrate earnings.

Watch for the DJIA SMA 25 to go down through the SMA 75 - that would be a definite sell signal (not there yet).

The last time the SMA25 crossed below the SMA75 it was June 18, 2008 and the DOW closed at 12,029. The SMA25 then stayed below the SMA75 until 4/21/09 at DOW 7803 - ten long months and 4226 points down.

- Kilroy - out.