by Chris Ciovacco
Financial Sense
2000 Dot-Com Peak: 200-Day Was Helpful
“As a trader who has seen a great deal and been in a lot of markets, there is nothing disconcerting to me about a price move out of a trading range that nobody understands.” – Bruce Kovner, Market Wizards
A market’s 200-day moving average can assist in monitoring investors’ net aggregate tolerance for risk. Notice in the first chart below the S&P 500 was unable to recapture its 200-day after dropping below it in October 2000. Compare and contrast the top chart to the bottom chart; notice how unlike 2000, the S&P 500 was able to recapture its 200-day after the Brexit bottom was made on June 27, 2016.