Stock Market: How to Use the 50 DMA

December 12, 2011

Mish's Daily

By Mish Schneider

Looking at the S & P 500 (SPY) chart, the important number to hold is the upwardly sloping 50 DMA. That would keep the island bottom and phase intact. Furthermore, the monthly moving average comes in right there as well.

I look at 3 things concerning the 50 DMA-the slope (which is positive), the number of days the price breaks above or below for a phase change (has to be 2 consecutive) and the daily volume once it trades at the moving average relative to the daily average. Today's volume pattern has no significance as far as phase strength or change.

QQQ: .55.67 is the low from 11/30 and key to hold up along with the weekly moving average at 55.45.

IWM: DOJI and inside day.


GLD Got negative in metals end of last week, but when it gaps so much lower, very hard to control risk.

XRT (Retail) Inside day after Golden Cross last week.

SMH (Semiconductors) Gap from 11/30 intact as long as 29.55 respected.

XLF (Financials) 12.75 a key moving average support to hold and if does, will see that as a good sign for another run to 13.60 for now.

XLE (Energy) Held the 50 DMA.

OIH (Oil Service Providers) Good daytrading short if followed Friday's range break. Still vulnerable at these levels

TBT ChartTBT* (Ultrashort 20-year Treasuries) After a huge green candle last Friday, today had a narrow range, inside DOJI day.

IBB (Biotechnology) Held the 200 DMA to close just ok compared to retail. Has to distance itself from the 200 DMA.

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