it is NOT a coincidence, but it doesnt mean it is perfect or will work every time
— Brian Shannon, CMT (@alphatrends) September 17, 2021
Today’s Chart of the Day was shared by Brian Shannon (@alphatrends). All eyes continue to be on the 50-day moving average as the S&P 500 closed below it today for the first time in three months. In a comment to The Chart Report, Brian explained that widely watched moving averages, like the 50-day, can be self-fulfilling in nature due to the fact that traders big and small make decisions around them. “It isn’t just institutions, it’s retail as well. How many traders have the 50-day on their chart? Most of them, we have all been trained that it is important so our actions make sure it is.” As Brian says, it should be thought of as a level of interest, rather than guaranteed support. It continues to be worth paying attention to, especially given how many times it’s been tested this year. Some near-term caution is warranted as long as we’re below it. It’s also worth noting that whipsaws around these moving averages are common, so patience is necessary to confirm a meaningful trend change.