Is The S&P 500 Setting Up For The Next Bull Run?

In my previous article on Bitcoin, I explained the historical importance of the daily 200 simple moving average (d200sma).

In summary, old school traders established it was the perfect indicator for the long-term trend. 

• If the price of an asset was above the d200sma, it had a bullish bias and traders looked for long opportunities. 
• It had a bearish bias if the price was below the d200sma and traders looked for shorting opportunities. 
• They never went against this bias.
• Institutions and trend followers such as myself still use this logic today. 

There is absolutely no need to reinvent the wheel, a mistake that many make. Instead, learn how the wheel moves and get it working for you. The brain craves complexity, but people often miss the simplicity of sound investing.

So let's apply this logic to the daily timeframe of the S&P 500, which I have below. 

The price broke and closed back above the d200sma on March 22nd after trading below it since Feb. 11. An initial push up of 3.6% was followed by a decline of 2% back toward the d200sma.

We are seeing a natural feature to price action known as a pullback. 

Why It's Happening: In my previous article on Bitcoin, I also covered how the d200sma is a significant support and resistance level. When the price moves through it, expect the price to pull back and retest it. Support is retested as resistance. In this case, resistance is being retested as support. 

At this point, the all-important but underappreciated skill of patience comes in, as price action could unfold in the following ways. The price could:

• Continue to weaken and move back below the d200sma.
• Continue to weaken, tag the d200sma and bounce back to the upside and push towards the current all-time high. 
• Find strength through the coming days and move toward the current all-time high. 
• The price could remain inside an area of consolidation between the high of March and the low of February. 

My preferred outcome is to see the price break out and push toward the current all-time high. The uptrend has been in play since 2009, so the odds are always with the bulls. 

It is essential to let price dictate a continuation instead of trying to predict one, and this is where patience comes in. 

This brings to mind the saying, "standing aside is also a position." It's an expression you will probably be familiar with but that is often not well-practiced.