Moving Averages are Just POTENTIAL Support Levels

There are times when a moving average will offer trend support or resistance to the penny and a lot of that has to do with the self fulfilling nature of technical analysis near widely watched levels.  The 50 day moving average is a very widely watched technical level and many people were looking to buy as the market touched that level.  Well the $SPY gapped down and closed below the 50 dma, so the perceived opportunity to buy never materialized.

I like to say that the moving averages are just a reference point to compare trend to and that they give us an idea of when to look a the action on a shorter term timeframe.  The video below describes more…