Courtesy of Joshua Brown, The Reformed Broker
Flop around in a flat market long enough and your moving averages begin to lineup pretty perfectly.
And then one day you break below them both at once – and lose the same support level you lost to trigger the August correction.
I’m using SPY instead of the index here:
The people who need to have a reason for this will blame:
- Oil
- Tax loss selling
- Santa is running late
- The ECB
- Rate Hike next week
- whatever
To me, the reason is probably less important than just having the awareness that short-term traders act differently above and below these support levels. Trigger fingers get itchier, liquidity becomes more in-demand and story stocks lose their appeal.
Investors should orient their expectations and mindsets accordingly.
