Significant Moving Average Tests For DJIA and S&P 500 (DIA, SPY, SDS)

We won’t go as far as to say that the DJIA and the S&P 500 are directly correlated even after the recent rebalance.  However, there is one common notion on today’s weakness that has brought up yet another serious chart alert.  Both the DJIA and S&P 500 are down and the alerts came up regarding the 50-day and 200-day moving averages.  This is being confirmed in both key market ETF’s in the charts of the DIAMONDS Trust (NYSE: DIA) and the SPDRs (NYSE: SPY).

Based upon our data the DJIA has a 50-day moving average of 8,378.63 and the 200-day moving average is 8,553.00.  At 8,374.60 on the DJIA after a 165-point drop, both of these are coming directly into focus.  It looks as though if no crazy price swings occur than we could have a convergence of the two major moving averages in another week to two weeks.  This is also being confirmed in the DIAMONDs (NYSE: DIA) at $83.78  with a 50-day moving average of $83.74and a 200-day moving average of $84.76.

The S&P 500 has a 50-day moving average of 900.79 and the 200-day moving average is 898.72.  After a drop of 24 points to 897.15, this puts both the 50 and 200 day moving averages front and center. This is also being confirmed in the SPDRs (NYSE: SPY) at $89.82 with a 50-day moving average of $90.12 and a 200-day moving average of $89.49.  Those two moving averages crossed late last week.

With this coming on the same week as an FOMC meeting and when traders feel the market got too far ahead of itself, these charts are going to be crucial compared to a few weeks ago.  We have provided two charts from StockCharts.com below to show an example of these key moving average alerts:

And if you want the volatile of the volatile, then you always have the ProShares Ultra Short S&P 500 ETF (NYSE: SDS).  The moving averages on the leveraged ETF’s, particularly the inverse ETF’s, are questionable as to whether they can be relied upon.

-Jon C. Ogg