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S&P/Using a 34ema/50ema Cross Over *PIC*
Posted By: Trades
Date: Friday, 3 July 2009, at 11:55 a.m.
Here is the SPX with the 34ema and 50ema. I have spent some time on cross overs and try to find combinations that give few false cross overs but yet are timely in nature. This 34ema/50ema is one of the better combos. Plus it is always a good idea to have the 50ema on a Daily chart as it is a very common mov av. that most traders use as a "touch base" indicator.(one could use 55 instead of 50 as it is close and would then be a Fib combination when used with 34 with little difference) Note the bull market high in Oct/07 at about 1575. While the typical and highly followed and respected 50ema/200ema cross over crossed down in Jan 9/08 at SPX 1407 note the 34ema/50ema crossed down Nov 14/07 at 1470. This was a full 63 S&P pts higher to short (or get out of longs) and about 2 full months ahead of the typical 50ema/200ema cross down. Also note the 34/50 mov av never crossed back up until the Mar/May/08 rally, and after crossed down again and remained down with no false cross overs until the positive cross up April 21/09 and remains in a bullish mode. As with anything there is no holy grail but indicators that have a "consistent" track record are worth paying attention to. Gather enough of these and you have given yourself an edge in trading regardless of time frames. Also note one when price moves a long ways away from the 50ema it is like a rubber band being stretched and will snap back and come home to "mama" as I have posted many times. Price always does. While this doesn't give you an exact point of entry or exit it does give you a good warning or heads up well ahead of time. Look at any chart and note how often price comes back to the 50ema. That is also something one can count on and add to your basket of indicators that is "consistent". One can then look at price and see it relative to the mov averages like a Bollinger Band as to how far away price is from the main mov average used. Also to improve timing one can still use their trendlines on rallies and sell offs to capture profits or buy/sell breakouts but using the position of the 34/50 cross as a guide and then re-enter on a return to the mov averages to get long again if the cross is positive or get short again if the cross is bearish.
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