It’s important to understand that the difference between the top and bottom of a market is an indicator of where those markets are moving.
A common way to gauge how much the market has rallied is to measure a gauge called the move in the SMA.
What’s important to know here is that the market is not growing at one rate. You can look at the SMA numbers for any given market and get different numbers depending on the sector, which often moves in the opposite direction for any given sector from day to day.
But the SMA is a good number at the end of the day, especially during periods when there’s a lot of volatility.
When the SMA moves above the 50-day moving average, most trading systems see a bounce in the stock price and a few seconds later the market closes above it.
The second important point is to think about the market from a perspective of the broader economy: in addition to the market, there’s also the labor market, retail activity, consumer confidence, etc.
When the SMA gets above the 50-day moving average, this is often the sign that investors are feeling more confident that we’re heading towards a “winning” period.
(Source: Thomson Reuters)
That’s why it’s especially important to be looking for signs of more positive developments when the market makes big movements, even if it’s only a 5- or 10-percent correction.
Another critical point is that it’s also important not to jump to conclusions when a market is experiencing a significant pullback.
For example, if the SMA is sitting at its current level for a few days, and then it dips to 4.10, there is little to be gained by being too quick to put out a “sell” signal.
If the market does a big reversal later in the year, investors may see the SMA in the 10-12 range again.
When the SMA moves in the negative as it has been, it’s also important to remember that this only means that you’re going to wait for something better to bounce back. Just because the SMA moves negative doesn’t mean that the stock market is in trouble.
It might also mean that this is an upper correction where the market may recover from a temporary bout of weakness but not go on a long trading run.
For example, if the SMA is
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