The premise of technical analysis is that the price carries information about a market’s future potential as well as its past. Since price is numerical, we can use mathematics to aid our analysis. For example, a moving average of price smooths its fluctuations and allows us to focus on the overall trend. Today the S&P500 opened with a gap above its 200-day Moving Average. The TeleChart screenshot below shows that with the dotted blue line as the 200-day MA. Technical analysis regards this as a bullish sign.
SPY Gaps Above 200 Day MA
With an ETF such as NYSE: SPY we have an opportunity to look under the hood to see how well its component stocks support it. Continuing with our example, we can check how many of the S&P500 stocks are above their 200-day Moving Averages. See the next screenshot from Telechart below.
SPY Components Above 200 day MA
We see that 283 of 500 stocks in SPY are above their 200-day MA. That’s slightly better than half and a terrific improvement from last month.
This is one example of the type of analysis that you can do on stocks in an ETF. To see more, check out the eMoneyShow webcast and chat room on Sept 15, 11am EDT. Click here to register.
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