Moving average-a-rama: Principal asset classes

By Prieur du Plessis, on January 18th, 2012 posted in: Investment, Markets, Money One comment so far

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I often use the 50-day moving average as an indicator of the secondary trend of a stock market, and the 200-day moving average as an indicator of the key primary trend. Specifically, one would like to see a stock market index trading above both these measure, but importantly above the longer-term 200-day line.

I have analyzed the moving averages of the principal asset classes using yesterday’s closing levels. The following are a few key observations:

1. The U.S. stock market indices and Brazil are above both the 50- and 200-day moving averages. (In the case of the Dow Jones Industrial Average and the South African All Share Index, the 50-day averages are also above the 200-day figures, representing a bullish signal called a golden cross.)

2. China is below both their 50- and 200-day lines.

3. India and Russia are above the 50-day averages, but below the longer term 200-day averages.

4. The euro is below both averages.

5. The oil price, U.S. dollar and U.S. government bonds are above both the 50- and 200-day lines.

6. The CRB Index (commodities) has just crept back above its 50-day average, but is still below the key 200-day average.

7. Gold last week breached its 200-day line to the upside, but still trades below the 50-day line.

In summary, the safe havens like government bonds and the U.S. dollar still have fairly solid technical pictures, but are starting to look stretched. In the meantime, more and more risky assets are starting to show promise as seen from the constructive action of a number of stock markets and some commodities.

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