Technical Analisys: Using 21-day moving averages to predict market direction on ETFs

Greg Troccoli, director of DWS Investments, Deutsche Bank Group, explained on BNN TV today why he uses 21-day moving averages. It is 21 days because there are 20 to 22 trading days in  a month. It gives an indication of which way the crowds are positioned. He is looking for a 20-25% correction on the markets.

He shows this example for SPY, the extremely popular S&P500 ETF:

In the last 6 months there There were less than 12 days when the slope was negative., therefore it was time to be long the market. However, if we look at the trailing end of the curves, it has fallen, therefore he is currently short on the markets.

Here are the 21-day MA charts for the popular QQQQ (Nasdaq), XLF (financials), and IWM (Russel 2000) ETFS:

Clearly they all show similar patterns. Whether the move down is sustainable remains to be seen. The next 5 or 6 days are important if the slope turns back up then most rallies will be sold into.

Also discusses gold, where the key level is 1070.

Watch video.