Stocks & Commodities V. 23:7 (97): At The Close by Jayanthi Gopalakrishnan

Stocks & Commodities V. 23:7 (97): At The Close by Jayanthi Gopalakrishnan

It doesn’t hurt to remember that the simplest of indicators can provide a great deal of information. I’m looking at the daily chart of the Standard & Poor’s 500 index when I say this because I can’t think of a better example of the behavior of the 50-day simple moving average (SMA). Note from the chart in Figure 1 how it acts as a resistance level. The average is sloping down, and on May 9, 2005 and the following day, prices hit that level and moved down. I have actually used this indicator for my long-term investments. When the value of the S&P 500 fell below the 50-day SMA, I moved all my long-term investments into stable value funds. Although my returns weren’t stellar, at least I can boast by saying that they didn’t lose any money.