p^t’s Emini Journal has a good lesson on spotting & trading trend reversals. And MaoXian gives a couple of more examples of both trading with the trend and counter-trend trading. (Ah, the lure of the counter-trend trade.)
Here’s an article which tests the widely held belief that crossing above the 200 day moving average is a bullish event. (warning, if you have a pop-up stopper, turn it on b4 clicking that link.) After running several tests, this is the author’s conclusion:
Arguing about the trend of the market based on the 200-day moving average might be fun at cocktail parties (depending on your definition of fun) but won’t really make anyone money. Instead, buying when the trend is absolutely, unequivocally down and the market is plummeting vis a vis its 200-day moving average is usually the best time to take a trade on the long side. By the time the talking heads are …
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