« Chart In Focus: Indices Testing 20dMAs Again »

The 20-day Moving Averages have been a strong ally of the bulls, since the markets hit a bottom in March. On more than a handful of occasions, during the 60%+ rally that we've seen from the lows on each of the indices, there has been a small correction that has taken the index to its 20dMA or just below, before the next blast of buying power has come in.

As with all things good, there will come a time when this trend will end. For the past 7 months (aside from a period of 2-3 weeks in late-June/early-July), the 20dMAs have been on the side of the bulls; however, conventional moving average theory suggests that when an underlying stock or index is trading on a given side of its 20dMA, the near-term trend should be expected to favour that side.

In other words, if prices are above the 20dMAs, the bulls will continue to be seen as being in control of the minor trend. If prices fall below the 20dMAs, the bears will stake claim to the minor trend.

The accompanying chart depicts the Dow Industrials, the S&P-500 and the Nasdaq-100 indices, in relation to their 20dMAs. As you can see, each of the indices is testing its 20dMA, this morning.

Dow Industrials, S&P-500, Nasdaq-100 Indices Daily Charts