FTSE 100 dips to 200-day SMA... always bounces?

[HarryHindsight]

It was a relatively exciting day for the markets which saw the FTSE dip suddenly to the 200-day moving average. Many news headlines are concerning themselves with the break of the Apple share price below $100. Looking at the FTSE 100 chart reveals that, at 14:45 when this occurred, it did indeed negatively impact general sentiment and hastened further FTSE losses. There is also increasing attention on the prospect of tighter monetary policy with noises to that effect coming from both the BoE and the Fed.

We remain in a long-term upwards trend and in bull markets it is our job to buy. However, picking the bottom of the dip is difficult and further declines from here are not unthinkable – the more risk averse investor might do well to wait for signs of strength; buying when the market is actually rising as opposed to falling.

Given we are now at the 200-day moving average, the FTSE is at an attractive buying point. If there is one takeaway lesson from this blog update, it would be that historically speaking the FTSE tends to bounce from the 200-day moving average…

http://harryhindsightnews.com/2014/09/25/25-september-2014-ftse-update/
(just my personal blog, nothing more than a little hobby - certainly not looking to sell any crap to anyone)

 

[HarryHindsight]

From a day-traders perspective the FTSE offered one or two attractive opportunities today:

Being the end of the month, markets often experience one-way buying/selling in to the cash close (in the case of FTSE, that being the 4:30pm London Stock Exchange closing bell). That wasn’t quite to be this time, but a very scruffy looking inverse head and shoulders may have signalled day-traders to the prospect of a quick buck on the long sight.

Far more convincing was the reversal later in the day from 6610 – a level that had earlier in the session provided obvious support. This was an absolutely classic example of support becoming resistance, and was further enforced by a small double top of sorts.

Of course, the bigger picture is that we remain in a long-term upwards trend, and are in the midst of a pull-back to the 200 day moving average. My best guess is the FTSE will resume the upwards trend at some point within the next several days.

 

[murray t turtle]

Yes they tend to bounce in a bull market;50 dma + 200ma. In a bear market AIG + Bank of America sector tends to bounce under 200 dma.Not a prediction.Its even stranger how often C + BAC sector tend to lose lawsuits.

 

[HarryHindsight]

The FTSE has been trending higher since March 2009, and in bull markets our job is to buy.

While the recent selling has placed this bull market under increasing pressure, why advocate taking short positions when buying has in general been the correct play for the last 5 years?
Often the best trades are those that require the most guts to pull the trigger on. The FTSE has declined below the 200 day moving average and more recently, the 2014 opening price – or “line in the sand” as I’ve called it more than once in this blog, which means you really do need some courage to go long. But what is more likely: that the market has finally topped out, or that the 5-year bull market will continue for at least a while longer? The smart money must be on the latter, so wait for buyers to return in the next couple of days (i.e. an “up” day) and that will be as good-a-time as any to jump on board the long-term upwards trend.

Nevertheless, all bull markets come to an end, and a decisive break below ~6460 would certainly constitute a major bearish move, possibly precipitating further panic selling and presenting a more favourable buy-entry point.