Test of 50 Day Moving Average

Last weekend the indexes came roaring up to meet the 50 day moving average. Normally the 50 day moving average will act as resistance in a down trend which we are in and have been since mid January. The recent run up since February 5th looked like it may race straight through that 50 day resistance level. Last weekend it looked like it had a good chance of breaking through the 50 day moving average and I was hoping to be highlighting some stocks by now. Alas the 50 day MA acted as resistance again and the indexes stalled. Most indexes are now teasing the moving average as they decide the next move. The indexes have become very volatile having very large intra day movements like yesterday for example. This extreme volatility is the bulls battling the bears at this critical juncture. As the bulls try to push the index through the MA the bears step in to sell it off, this creates the very high volatility. It will get itself resolved as the bulls or bears eventually step to one side. Often as both sides become exhausted the volume diminishes and the indexes get very tight with small movements (no way of knowing if this will happen this time). In any case the ideal situation would be for this bull/bear battle to resolve itself with the index eventually breaking out to the upside or downside on heavy volume.


Until this resolves itself it would not be prudent to be buying stock until the market shows its hand. For that reason I remain on the sidelines waiting to see whether the 50 day MA will act as resistance once again and send the market down or indeed whether it will be broken to the upside.