Larry ......... can you explain the 200 week moving average and the 200 month......... which charting site do you like as well.... thanks, Barry

Barry,

What I know about the use of the 200 week moving average and the 200 month moving average I read in this article about Michael Belkin...

http://www.thestreet.com/funds/supermodels/10121439.html

What got my attention about the two moving averages is that Belkin has found that they have "worked to define levels of support and resistance in every major bubble and crash he has studied over the last 100 years. A bear market bounce in a stock or commodity from its 200-month moving average to its 200-week moving average, he says, is relentless, takes about a year and ends with low volatility - all characteristic of the recent U.S. rally."

He points out that after the bubble burst in 2000 the Nasdaq found support at its 200 month moving average in October of 2002 at about 1180. He originally thought that the resulting rally would meet resistance at the Nasdaq's 200 week moving average of 2280. But he changed his mind about the Nasdaq getting that high when money supply growth started slowing. Now he thinks the Nasdaq will fall short of that target.

My main chart service is StockCharts.com. If you want an education on the use of moving averages in general and other technical indicators, they have a good "Chart School"...

http://stockcharts.com/education/

Larry

Larry,

I noticed that the Nasdaq found support at about 1180 right smack on the 200 month simple moving average (SMA).

I've been using exponential moving averages (EMA) on my charts because I read that it gives more emphasis on more recent data and is not as sensitive to sudden large moves in a stock.

However, the 200 month EMA plots considerably higher than the SMA where it found support at 1180.

What's your opinion on using exponential vs simple moving averages? Thanks!

Jacques

Jacques,

Sorry it has taken so long to respond. I've been swamped. I generally think EMA's are superior to SMA's for just the reasons that you stated. However, I look at both because there are certain SMA's that are so widely followed that they tend to take on meaning because of their popularity. The 50 day SMA and the 200 day SMA are two obvious examples. I want to know what other market participants are looking at because if I can figure out what the majority of them are doing I can better identify support and resistance.

Another thing I try to do with moving averages is to look at several differnent ones on a chart and to try to find one that has offered reliable support or resistance for a stock in the recent past. And then I'll pay attention to it until it no longer seems valid.

Larry

Larry,

That makes a lot of sense.

Thanks again!
Jacques