At some point in your life (maybe even recently), you’ve likely heard the saying, “trust your gut – it’s always right.”
While that may be true for some things, like your health, it’s the last piece of advice you want to follow when it comes to trading.
In fact, trading by your gut is really no different than trading by emotion – which is the single fastest way to lose your money.
The major U.S. indices open today right about where they started the month of August.
The Dow has lost -0.85%.
The S&P 500 is down just -0.09%.
The Nasdaq gave back -0.84%.
If you are a straight “buy and hold” equity investor, you probably haven’t made too much money this month. But if you’re an options trader, you could be taking profits all along the way, like we have!
So what’s the rest of the month have in store for us?
If you love technical analysis as much as I do, it probably has not escaped you that the Dow Jones Industrial Average shows what is known as a “death cross.” (Click here for a closer look at that.)
That’s a trading term for when the 50-day Simple Moving Average (SMA) crosses below the 200-day SMA, as it did last week, on August 10.
A death cross gives an indication of some weakness in the average.
However, its meaning isn’t as clear cut as you might think. Will it mean lower prices? Or will it simply be a short-term cross that will rectify itself as prices go higher, eventually bringing the 50-day SMA back above the 200-day SMA? Only time will tell.
I’m looking at this shape instead…
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