One of the indicators I track for both long & short term trades, is the percentage of stock trading over their respective moving averages. On the shorter term I use the 50 day moving average, here on the S&P 500 the chart is $SPXA50R. When over the 80% mark is a red flag SELL, it could be quick or stay overbought as the $SPX rises, again I use other indicators and this is not a stand alone...but a significant one albeit. Now on a longer term call, I incorporate the 150 & 200 day moving average percentage. When all 3 moving averages trend over 80...IT'S A SELL and viceversa when below 20% a BUY. Although not a focused and pinpoint timing indicator, it can be used to avoid the recent major decline of 40% in the markets...as well as a re-entry into an oversold market. If you ignored the Sell Signal in early 2007 and held a $10,000 position in the $SPX would be worth $6,760. Where as if you'd sold between $SPX 1400 & 1500 & then re-entered back around 700/800...that $10,000 would be worth $13,000! Almost double, not to mention what you could of made doing nimble trades using the $SPXA50R in the decline or if you used leveraged index ETF's or options??? My observation is that the $SPX will continue to rise and test the 1,000/1050 resistance level before correcting back towards it's moving averages. One other note, I've mentioned this in prior posts, look at the $SPX weekly chart using the 26 week EMA against the 52 week SMA...that's close to a long term BUY signal. But my technical/fundamental & sentiment indicators point to a blow off rally coming soon and then a pullback into Sept/October in the next earnings season to support stock valuations. If this recovery shows improvement...especially on the lagging jobs reports [2010] then the $SPX can possibly head towards the 1,200 area by the end of 2009.
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