The latest correction in financial markets has been pretty mild, all things considered. Soon, the first test on whether or not this was a very short term and modest correction – or the start of a longer and larger decline, will begin.
What I’m referring to is the 50 day moving average (the average market value the past 50 days. Traders often view this as key support and resistance to market trends. Currently the market is below the 50 day average. Back in June it fell below for awhile, but when faced with getting back above it the market blew through and raced to new all time highs. Just a couple weeks ago, though, it failed to get above the 50 day average and fell lower.
Well, today the market touched that 50 day average again, and retreated. I suspect we’ll make at least one more run at this average soon and the result should let us know what the next trend is. Should it fail, watch out. If it breaks through and goes higher, it could be a nice ride.
I’ll be watching closely and will report back as soon as we see this unfold.