MOVING AVERAGE? IT FORECASTS ANYTHING? OHHH, GOSHHH...

Basically it doesn’t forecast anything. I know millions of investors, traders who believe out there in MA’s, but it is totally worthless, it only shows the past not the future as Peter Lynch’s great bonmot says “Technical analysis is a great stuff to forecast the past.” Same for MA, it is brutally useless in trading. Doesn’t give you any more information about the future than the price itself, it is only able to tell you the past how performed, it was bullish or bearish.

For me that feature of MA is more than enough. In my view, if you understand the main direction of the market you know more about the market than 90% of investors. For me is crystal clear the indices in US and Europe are bullish, there is no doubt about that. That is why we are only on the buying side since we are trend followers.

Our market view is supported also by Moving Average. Indices ended last week at new records again and seems the rally unstoppable. The S&P 500 is closed above its 5 day MA for the 26th consecutive day last Friday. The best all-time streak was 27 straight days in 1986. And, what happened in 1986? The great bull market continued further unstoppable which had started in 1982. That secular trend rally lasted until 2000, for more than 16 years. Is there any correlation? We don’t know yet for sure, but one fact is obvious that this last 5 weeks rally and the stormy V-shape recovery only possible to happen in a very bullish momentum and bullish market conditions.

The BFM Assets Team.