Phil Grossfield's Blog

A LITTLE EXTRA…

Market Wrap – Explanation of Moving Averages – Floors & Ceilings

My Market Wrap:   BONDS FALL BELOW 200-DAY FLOOR  I find this significant…let me explain…

We had a nice run of bond trading above the 200-day moving average floor, but today the trading closed below the floor. If you use my Glass Elevator analogy, the 200-day moving average is no longer a floor…it has become a ceiling.

Moving Averages are simply lines on a graph that give traders information on where the bond has traded over time. The 200-day moving average is the one we’re looking at now.

c34LAST WEEK, when the bond was trading above the 200-day moving average, it acted as a floor of support. Why? Because as bonds were being sold off, the price would fall towards the floor and then traders would start buying and the price would go up…the floor acted as support for bond prices…it kept bond prices from falling too low.

TODAY, the trading fell below the floor. Now the bond is trading underneath and as a result the 200-day moving average has become a ceiling…it now acts against us…it’s now a ceiling of resistance.  Now traders look to the line as a reason to sell, not to buy. I hope that’s not too confusing.  If this doesn’t make sense to you then call me…I would be happy to explain it.  Like most things, it’s not a difficult concept to understand, but it is something you have to learn…it’s not intuitive. Let me know if you have questions…

So, now that the bond is trading below the floor, I expect rates/pricing to open next week lower, unless of course there is some economic report or other geopolitical news that influences traders to buy bonds. If I’m right, pricing should be worse at the beginning of the week…


JOIN MY TEAM FOR CANCER RESEARCH!  All You Have To Do Is Not Shave! 

Last year I grew a gnarly mustache and beard. It was so thick you could barely see my face at all. When you think MAN, think Phil. Below I explain why I decided to grow my mo for cancer research last year.  This year my buddy Mathew and I started a team…JOIN US.  All you have to do is not shave!  

Movember is a fundraiser for research in battling male Cancer afflictions.

movember2

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: