"You have often mentioned 200 day MA and that, if enough people believe that it will behave as a long term support, then it will become self-fulfilling. I came across another interesting view in the form of a comment: "It is rather interesting that the ubiquitous 200 day moving average (actually 40 week ma) still works at all, because everyone seems to know about it."

"Obviously the person who said this did not have your expertise but the reply of the famous trader Larry Williams made was interesting: "Technical indicators, I think, can be widely known about and still 'work' because of the frailty of humans; as a group we have problems with following/sticking to rules. We can all know we should not drink and drive, speed, do drugs, smoke, etc… but most violate basic rules."

"Your comments, if any, are humbly solicited."

David Fuller's view And humbly provided. :-)

The 200-day MA often works within medium-term trends because it is not a contrary indicator, unlike extremes of crowd bullish or bearish sentiment, which tell us more about what people have actually done, rather than what the market will do.

I do not think that the 200-day MA has anything to do with "rules", as mentioned above. Also, it is not something that can be easily exploited in advance of the event. Following a period of temporary overextension, if people think that the market will react and possibly test its MA within an uptrend because they have seen it happen before, it may influence their behaviour. In other words, if contemplating selling, they are more likely to do so well before the MA is reached, often contributing to diminished selling pressure as the MA is actually reached. Similarly, if other people are looking for buying opportunities within a reasonably consistent uptrend, they will be encouraged to purchase on seeing the instrument find support near the MA following a pullback.

For these reasons Eoin and I have often said: if you are looking to sell, it is better to do so when the market is overheated following a good run, not following a setback caused by profit taking. Conversely, if you are looking to buy within an uptrend, don't chase but look for a pullback.