Moving Averages for the S&P 500 Index and What They Indicate



Moving averages of the S&P 500 Index

The S&P 500 Index (SPX-INDEX) (SPY) is trading 16.9% above its 100-day moving average as of December 1, 2017. It’s also trading 8.8% and 4.6% above its 50-day and 20-day moving averages, respectively.

The 20-day moving average for the S&P 500 Index (QQQ) crossed above its 50-day and 100-day moving averages in June 2016. The 50-day moving average crossed above its 100-day moving average in November 2016 after the outcome of the US presidential election. When a short-term moving average crosses above its long-term moving average, the sentiment becomes bullish and is known as a bullish crossover.

Uses of moving averages

Moving averages are technical indicators. Investors use them to analyze the movement of the market (SPX-INDEX) and forecast the future movement of the market (COMP-INDEX). These are lagging indicators. They’re also known as trend-following indicators since they work on past prices.

The S&P 500 Index rallied 23.6% between November 8, 2016, and December 1, 2017. The bullish crossover of the index’s moving average indicates that the index is continuing its upward direction and might go higher in the near future.

In the next part of this series, we’ll analyze the performance of the volatility index in November 2017.

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