Take a look at the left side of the chart to see how effective moving averages are for setting up short-term trade entries (on bounces to the EMAs) and then how useless these same EMAs are in the context of a Trading Range.
The Range Alternation Principle – that the market alternates between trend and range – teaches us to favor certain indicators in trending environments (like moving averages) and then ignore them (favor other indicators like Bollinger Bands) in range contraction/consolidation environments.
http://blog.afraidtotrade.com/the-current-contracting-consolidation-in-the-sp500/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+afraidtotrade%2FNRSd+%28Afraid+to+Trade.com+Blog%29&utm_content=Google+Reader#
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