by John Sweeney
Let me speculate a little here. I know from experience that the half-cycle moving average generally
runs along the tops of declining trends and along the bottoms of rising trends Ñ at least in the financials I
follow. This behavior makes it possible to identify rich sells in declines and cheap buys in advances. But
why does the average behave this way?
Well, a moving average Ñ as we usually plot these things Ñ is actually plotted ahead of its "centered"
position. Instead of plotting it in the center of the data periods that it averages, we plot it at the latest
period. To illustrate, in the figure below, I've drawn a 90-day sine wave and penciled in 45-day averages,
one centered and one "advanced." If the lines aren't clear, the centered average matches the fluctuations
of the sine wave exactly.