Moving Averages Turn Positive

10/07/2010 10:10 am EST

Focus: OPTIONS

Thomas Aspray

, Professional Trader & Analyst

chart
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Though some of my diehard technical analyst friends roll their eyes when I talk about the 50- and 200-day moving averages (MAs), these measures are followed by many investors. This Dow Industrials chart goes back to 2002, and on the bottom is a histogram that measures the difference between the two moving averages. When the 50-day MA is above the 200-day MA, the histogram is above zero, and when below zero, the 50-day MA is below the 200. During 2005, you will note there were multiple signals, but from 2006 through 2009, it did much better. It turned negative on July 7, 2010 and back to positive on Friday, October 1.

Tom Aspray, professional trader and analyst, serves as video content editor for MoneyShow.com. The views expressed here are his own.

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