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Moving averages aren't support or resistance!
$SPY and the 200-day moving average
I’ve read and heard this phrase many times in the last few weeks. And it’s true.
Moving averages aren’t support or resistance…..
……until they are.
That’s why we say “potential” support or resistance.
Moving averages, chart patterns, price levels — none of these things ever matter.
Unless they do.
They’re all just possibilities. And we’re all just looking for ways to frame what we think and see into some kind of story that will help us place the next trade.
So does the $SPY turning back at the 200-day MA mean the rally is over?
Yes? No? Maybe?
But the picture that has emerged seems to show that the buying has stopped, or at least slowed down. And it also shows that whether or not you were watching or care about the 200-day MA, plenty of other people were.
So if price can get above that level does it matter?
We can only know after the fact — after we see the aggregated action of all the other market participants.
I think if price does get above the 200-day it means that the collective mind has decided that the test has been passed and that a move higher is the higher probability outcome.
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Is it a sure thing? Not by a long shot.
Is it useful? It is to me.
And that really is the whole point — to find a process that is useful, profitable, and repeatable.
It can, and will be different for all of us.
So if you don’t believe in:
Support and resistance
Fine. Discard it and move on. There are many different solutions to this puzzle. Find the thing that works for you and work your process routinely and with discipline.
That is the only real truth in trading.
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.
It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.
All investments are subject to risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants or other qualified investors prior to making any investment decision.