9 Minute Read

Tackle Today: SPY and the 50-Day

June 21, 2021

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It’s crunch time

Traders,

Friday saw the S&P 500 close below the 50-day moving average for only the third time this year. It’s an unsettling development that had bulls cowering throughout the weekend. Many chart watchers use the 50-day moving average as a proxy for the intermediate trend. When prices are trending above it, the path of least resistance is higher. When prices tumble below it, however, the path of least resistance turns lower.

It’s a good line in the sand to watch for determining your directional bias. Now, here’s the silver lining. Though every bear market in history started with a break of the 50-day, not every break of the 50-day led to a major bear market. Some were fakeouts or bear traps designed to scare the children, but nothing more.

The previous two episodes when we closed below the 50-day this year marked the bottom of each pullback. Rather than spelling the beginning of a nasty correction, they signaled the end. Fingers crossed that this one proves similar. As always, time will tell.

With an hour in the trading session and the S&P 500 up 1%, I’d say we’re off to a beautiful start.

#TeamTackle


Chart of the Day

So far, so good


Bulls have aggressively defended the 50-day moving average in 2021. The third test of their resolve is playing out as I type. Traders worrying about continuation lower after last week’s sucker punch have to be pleased by Monday morning’s defense. Mark Friday’s low ($414.70). That’s the new line that we must remain above.


Video of the day

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