Author: Chris Hood
It appears the Santa Claus rally is underway.
Wednesday’s FOMC minutes suggest that the Fed could ease up on their hawkish QT policies – or at least slowdown and reassess.
That seems to be the narrative in the financial media anyway.
Whatever the catalyst, the road to Christmas looks promising for the bulls.
However, before you’re convinced the recovery is underway, I want to introduce a key indicator. One that every trader MUST have.
And it’s readily available for free.
This technical signal is one of the most powerful for determining longer-term trends and inflection points in the market.
It’s also one that is going to be critical in the next couple of weeks and may decide whether we have sustained bullish momentum or a complete meltdown.
So what exactly is it?
It’s the 200-day moving average, and it deserves a prominent place on every trader’s chart.
Let’s look at the current relationship of SPY to the 200 MA.
The 200 MA is a decision point for many mutual and hedge funds regarding whether they buy or sell.
This is where huge blocks of shares move around.
Notice on the graph how each time SPY has hit this point (or zone), it’s been the end of the upswing…and we’re closing in on it now.
This could be a major inflection point.
If we break through and hold, there could be some additional upside. After all, bear rallies of 20%+ are not unknown.
But if it doesn’t, then look out below.
I only wanted to place our current situation in context. Moving averages alone have not proven to be a high-probability strategy for most people.
However, keep your bullishness in check.
Study your charts, trust your indicators, and play a defensive game.
This is what we’ve been doing in the Trade Command Network live trading room, and this market has been amazingly profitable since the beginning of the year.
Remember, with options, you can profit no matter what the market does.
It just helps to be looking over the shoulder of someone who has been doing this for nearly two decades.
If you go on it on your own, then I wish you the best.
Minimize your risk and protect yourself from the downside.
PS – If you’re struggling in this bear market, let the Trade Command Network put you on the path to profits. We closed a trade just last week for an 818% gain on SPX. Get in on the action by clicking the link here.