It appears that the red and green arrows on those charts denote when the value being plotted (for example gold /WTI Oil) moves below or above the 50-day moving average, respectively. However, the number 50 seems rather arbitrary. How is it derived, and why not, say, 40 or 60 or any other number? It seems a bit like reading tea leaves to me.
Gary July 2, 2022
Yes of course! It’s TA, therefore it is by definition reading tea leaves. If you’ve seen my Men Who Stare at Charts posts, you know my views on that. TA is a tool, not a be all, end all solution. Anyone trying to imply that is selling snake oil. That said, the SMA 50 is used simply because it’s the most watched average to an intermediate trend. If it changes, then legions of TAs will be all over it. In other words, you want to see what a majority are seeing (and reacting to).
But as proof that it can work, look at the two top panels, gold vs. stocks. Break above the SMA 50, hard re-test and then a change to a new intermediate trend. It worked in that case. Ditto Gold/GYX.
There is no finite guru prediction bullshit at this website. Just tools that help guide.
Comments are closed.
Discover more from Notes From the Rabbit Hole
Subscribe now to keep reading and get access to the full archive.
It appears that the red and green arrows on those charts denote when the value being plotted (for example gold /WTI Oil) moves below or above the 50-day moving average, respectively.
However, the number 50 seems rather arbitrary. How is it derived, and why not, say, 40 or 60 or any other number? It seems a bit like reading tea leaves to me.
Yes of course! It’s TA, therefore it is by definition reading tea leaves. If you’ve seen my Men Who Stare at Charts posts, you know my views on that. TA is a tool, not a be all, end all solution. Anyone trying to imply that is selling snake oil. That said, the SMA 50 is used simply because it’s the most watched average to an intermediate trend. If it changes, then legions of TAs will be all over it. In other words, you want to see what a majority are seeing (and reacting to).
But as proof that it can work, look at the two top panels, gold vs. stocks. Break above the SMA 50, hard re-test and then a change to a new intermediate trend. It worked in that case. Ditto Gold/GYX.
There is no finite guru prediction bullshit at this website. Just tools that help guide.