$DIA: 200-day moving average of Dow Jones Industrial Average Bear market rallies fall hard after they stall (just as pullbacks in bull markets lead to sharp rallies). The SPDR S&P 500 ETF ($SPY) spent most of 2022 below its declining 200-day MA, but tested that resistance level a few more times than $QQQ.Īs with $QQQ, each $SPY rally attempt failed after running into its 200-day MA, leading to a new wave of selling and lower lows every time:Īfter each rejection at the 200-MA, notice the price also fell back below the shorter-term 20-day MA within two weeks. $SPY: 200-day moving average of S&P 500 Index The opposite of this basic rule of technical analysis is also true. It’s been 9 months since $QQQ touched the 200-day MA, but the next market rally attempt could quickly lead to a new test of Nasdaq’s 200-day moving average.īy the way, the $QQQ chart above clearly demonstrates how a prior level of support becomes the new resistance level-after the support is broken. $QQQ again tried to break out two months later, but resistance of the 200-day MA crushed the rally attempt each time: This is not surprising, as funds typically rotate out of tech growth stocks and into less volatile sectors in bear markets.īelow, notice that $QQQ fell below support of its 200-day moving average (orange line) in January, then ran into new resistance of that same level when stocks rallied a few weeks later. $QQQ, a popular ETF that tracks the Nasdaq 100 Index, showed the most weakness of all the major index ETFs in 2022. $QQQ: 200-day moving average of Nasdaq 100 Index Now that you understand what the 200-day moving average is and how it works, let’s see it in action on charts of the main stock market indexes. Overall, the 200-day moving average is a fantastic indicator due to its long-term perspective, widespread use, and potential to act as a level of support or resistance. This can be useful for traders and investors looking to enter or exit positions based on whether an index or stock price is able to break through the 200-day moving average.
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