Moving Averages Help You Define Trend – Here’s How

This simple moving average "works equally well in commodities, currencies, and stocksquot;

By Elliott Wave International

The "moving average" is a technical indicator of market strength which has stood the test of time.
Over 30 years ago, Robert Prechter described this indicator in his essay, "What a Trader Really Needs to be Successful." What he said then remains true today:

...a simple 10-day moving average of the daily advance-decline net, probably the first indicator a stock market technician learns, can be used as a trading tool, if objectively defined rules are created for its use.

So, what is a moving average?

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Learn How You Can Find High-Confidence Trading Opportunities Using Moving Averages
Moving averages are one of the most widely-used methods of technical analysis because they are simple to use, and they work. Learn how to apply them to your trading and investing with this free 10-page eBook from Trader's Classroom editor Jeffrey Kennedy.
Begin to improve your trading and investing with Moving Averages today! Download Your Free eBook Now.

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Elliott Wave International's Jeffrey Kennedy, a 25-year veteran of technical analysis, provides an answer:

A moving average is simply the average value of data over a specified time period, and it is used to figure out whether the price of a stock or commodity is trending up or down.

One way to think of a moving average is that it's an automated trend line.

Kennedy offers an array of examples and insights about moving averages in the instructive guide, "How to Find High-Confidence Trading Opportunities Using Moving Averages." Below, you see some of Kennedy's charts.
Let's begin with the most commonly-used moving averages among market technicians: the 50- and 200-day simple moving averages. These two trend lines often serve as areas of resistance or support, levels the market needs to "respect" in order for the trend to continue.
For example, the circled areas in the chart below show you where the 200-period SMA provided resistance in the DJIA's rally back in April-May (top circle), and the 50-period SMA provided support (lower circle):

Let's look at another widely used simple moving average which "works equally well in commodities, currencies, and stocks," according to Kennedy: the 13-period SMA.
In the sugar chart below, prices first crossed above the red SMA line, which led to a substantial rally. The circled area shows you the first time the price crossed below the SMA, which came to indicate a change in trend from bullish to bearish:

Kennedy's "How to Find High-Confidence Trading Opportunities Using Moving Averages" also informs you about a useful tool to help you avoid "whipsaws."
Indeed, the first two chapters reveal:

• The Dual Moving Average Cross-Over System
• Moving Average Price Channel System
• Combining the Crossover and Price Channel Techniques

Jeffrey Kennedy's insights are all about making you a better trader.
Learn How You Can Find High-Confidence Trading Opportunities Using Moving Averages
Moving averages are one of the most widely-used methods of technical analysis because they are simple to use, and they work. Learn how to apply them to your trading and investing with this free 10-page eBook from Trader's Classroom editor Jeffrey Kennedy.
Begin to improve your trading and investing with Moving Averages today! Download Your Free eBook Now.

This article was syndicated by Elliott Wave International and was originally published under the headline Moving Averages Help You Define Trend – Here’s How. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Dreaming of a "Comfortable Retirement" on a Public Pension?

A 9-year bull market fails to close the pension gap

By Elliott Wave International

Did you realize that many U.S. pension funds are in trouble even though stocks have been rising since 2009?
Even so, many retirees expect a comfortable retirement.

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Jump on once-in-a-lifetime opportunities and avoid dangerous pitfalls that no one else sees coming. We can help you prepare for opportunities and side step risks that will surprise most investors. You can get deeper insights in Elliott Wave International's new free report: 5 "Tells" that the Markets Are About to Reverse. The insights that you'll gain are especially applicable to the price patterns of key financial markets, including the stock market, now. Read the free report now.

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Our March 2018 Elliott Wave Financial Forecast showed this chart and said:

Over the last 20 years, [a University of Michigan] poll asked the following question every month: "Compared to five years ago, do you think the chances that you will have a comfortable retirement have gone up, gone down or remained about the same?" Considering that the line between a better and worse retirement is a reading of 100, consumers have been mostly glum about their retirement prospects since the record optimistic extreme of 123 in November 2000.... After stocks had been rising for five years... the survey's results pushed to a high of 105 in February 2007.... The chart shows retirees' negative responses as stocks crashed in 2008 and early 2009....

In March of 2017, retirees finally capitulated once again to the uptrend in share prices by registering a response of 104.... Last month, the survey even pushed to a 17-year extreme of 109.

A big reason why the hopes of retirees may be sorely misplaced is that the shortfall in local and state pensions is a staggering $4 trillion, according to Moody's Investors Service.
On July 30, the Wall Street Journal put that figure into perspective:

The Pension Hole for U.S. Cities and States Is the Size of Germany's Economy

Many retirement funds could face insolvency...

As the article notes, a fund covering Chicago municipal employees had less than 30% of what it needed in fiscal year 2017. New Jersey's pension system for state workers is so underfunded that it could go broke in 12 years, according to a Pew Charitable Trusts study.
But, in EWI's view, many public pension systems may become insolvent long before then.
In fact, this is already happening with retirement-age individuals.
On Aug. 5, The New York Times reported:

The rate of people 65 and older filing for bankruptcy is three times what it was in 1991.

With pension funds heavily invested in risk-assets like stocks, imagine the scenario during the next financial downturn.
Our analysts' comments about the stock market's technical picture should be of high interest to every market participant, including those expecting a comfortable retirement.
Regarding the details of EWI's technical analysis at the time, we encourage you to see them for yourself in a new free report that remains relevant now (see below).
Read the free report now -- just look for the quick-access details below.
Learn how to spot once-in-a-lifetime opportunities and avoid dangerous pitfalls that no one else sees coming.
We can help you learn how to spot opportunities and side step risks that will surprise most investors.
You can get deeper insights in Elliott Wave International's new free report: 5 "Tells" that the Markets Are About to Reverse.
The insights that you'll gain are especially applicable to the price patterns of key financial markets, including the stock market, now.
Read the free report now.

This article was syndicated by Elliott Wave International and was originally published under the headline Dreaming of a "Comfortable Retirement" on a Public Pension?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.