Ut Ohh?!.... $SPXA200R

One of the indicators I use that has provided a fairly accurate signal for overbought/oversold conditions on the S&P500 has been the percentage of stocks trading over their respective 50, 150 & 200 day moving averages. In this chart I've annotated, note the overbought (SELL) conditions back in 2007 and then the extremely oversold 'Trifeca' BUY signal March of 2009. This week we got a break of the 75% level on the $SPXA200R a SELL. The $SPXA150R has already been several days in Sell mode...however the 50 day percentage ($SPXA50R) is now in oversold, a shorter term signal. What does this all mean? The $SPX should see a short term reversal soon, perhaps a bounce off of the 200-ma around 1020/1025. Watch to see if the 200 percentage gets back above the 75% level, if that occurs. All in all the markets are more likely going to be choppy and see side ways to lower trending direction. Obviously the weaker dollar rally has ended (for now) as the weaker Euro has hurt equities. I'm watching the 136 level and for a bounce along with the 81 level as resistance near term on the dollar. This week should bring more clarity & direction as to the markets uncertainty.

Making Money With Percentages

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.