We saw a lot of drama happening for few days, regarding US markets. Sometimes there is crude oil playing spoilsports, sometimes renewed fears of credit crunch and then the Japanese currency. Well, I'm not going to delve into the fundamentals for the time being. I'm writing this just to put an interesting view of S&P 500 index chart. The chart is from Yahoo Finance and you can view it at http://finance.yahoo.com/q/ta?s=%5EGSPC&t=1y&l=on&z=l&q=c&p=m200,m50&a=&c=
I selected one year chart (3day) of S&P 500 and just put on 50 and 200 Day Moving Averages (DMA).
In January, the 50 DMA crossed 200 DMA on the downside which is considered quite bearish. Since that time, it is trying to get past the 50 DMA but managed only in April. After this "achievement", its trying hard to cross 200 DMA and even 50 DMA is moving up to cross 200 DMA. If we see last two candles in the chart, it took support exactly at 50 DMA.
Now the situation is quite interesting. The 50 DMA is moving up, while the 200 DMA is falling. This means there are good chances the two will meet. BUT... the question is - is it going to be a touch and retrace kind of thing OR a crossover? Well, the bulls are sitting with their fingers crossed but for a trader who is willing to trade and not trying to preempt, that meeting point or thereabout should be a good time to go short with risk reward ratio being good. The Stop Loss for shorts should be a powerful crossover with good volumes. If it goes like that, then shorts can turn the table and go long side, at least for some short term good returns.
I conclude my view with the usual but important caution: Trading in Stock Markets is risky and may not suit all. Its better to get professional advice before you take any real trade.