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O.K. 200 day moving averages might not be that much fun for some people, but here are some tricks make it a useful index to follow.

Many people would correctly point out the 200DMA is really just looking in the rear view mirror, and they're right. The 200DMA is a very good estimate of the price 100 days ago (half the period). Isn't that really what an average is. The following chart is the 200 DMA offset by 100 days (generated on netdania).




We can use this observation to our advantage. Knowing a good 'average' for the last 200 days allows us to calculate short term (100 day) and long term (~year) rate of returns. These ROR values are a good indicator for general market conditions (overbought or sold). Looking at these rates over a longer range reveals some interesting cyclical patterns. Note the distinct 2 year cycle in the short term interest rates. By the charts this should peak in March-May 2010, but DYODD.

Thanks for the charts. I wish I hadnt come so late to the game. I should have been paying attention earlier this year, but I still feel like I have really no choice to buy now with the overall state of things - namely OPEC moving to a basket of currencies, the FED printing dollars as they're going out of style, and china un-pegging the yuan - I think 2010 is sure to be a big year for commodities.