Traders made money ‘selling the rip’ in stocks last year. Why it might work again in 2023.
Market gurus are eager to see if a technical signal that helped tactical traders wring profits from last year’s market rout will continue to work in 2023, as stocks struggle to hold ground Monday after breaking a streak of weekly losses.
As markets trended lower in 2022, many technically-oriented traders hit upon a strategy that seemed to work: selling, or shorting, U.S. stocks once the S&P 500 hit its 200-day moving average.
In this case, the moving average, which is a gauge of the market’s long-term direction, served as a reliable indicator that the latest flash-in-the-pan rally — often driven by signs of cooling inflation or fleeting hopes for a less-aggressive Federal Reserve — had exhausted itself.
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