The 200-day simple moving average (200-Day SMA) is a highly sought-after indicator of short-term market direction and trend. This week, investors are watching the battle for the 200-Day SMA as the market’s action attempts to break out in either direction.
At the center of the battle is the current level of the 200-Day SMA. If the market close is above the current level then bullish sentiment will prevail and the market will likely rally in the short-term. Conversely, a close below the current level would lead to bearish sentiment and lower prices.
The debate over who will win the battle for the 200-Day SMA is one of the most riveting conversations amongst traders and professional investors. On one side, technical analysts are arguing that the market is due for a pullback and that a break-down in the 200-Day SMA would signal a change in trend. On the other side, fundamental analysts are insisting that a break-out is imminent and that bullish trends are here to stay.
Regardless of which camp prevails, traders should pay close attention to the 200-Day SMA. Not only can price action around the SMA be a helpful indicator of near-term market strength or weakness, but the SMA can also be used to identify potential entry and exit points.
Investors should be mindful of the battle for the 200-Day SMA, as it has the potential to make or break the market’s short-term direction. Ultimately, the market’s outcome in the near-term may not be accurately predicted but traders should still keep a close eye on the action surrounding the 200-Day SMA.
