‘Over long-term time frames prices both rise AND fall. When prices rise or fall extreme distances from their underlying average, the gravitational pull of the moving average will drag prices back. The example I most often use is that of a rubber band. When a rubber band is stretched to its extreme and is released, it will snap back an equal distance in the opposite direction. This is what happens with prices over time. The chart below is a monthly chart of the S&P 500 as compared to it 36-month (3 years) moving average.’
…..click on chart for larger view and much more analysis
