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Let's Play Ping Pong!!
It was only 5 short months ago, and prices on the major equity indices were below their simple 40 week moving averages. They were extremely below, and most were expecting some sort of snapback as the rubber band was stretched rather tightly. Well, the snapback has come and gone, and now we find prices on the other side of their 40 week moving averages, and oh by the way, we are entering extreme territory again (but on the other side of the 40 of course). The hot and cold market lives on as prices ping pong from one extreme to another.
The point here isn't so much to say, "Ah, prices are extreme and this is a top". Barring a market top, the extreme move from March, 2009 is indicative of two things: 1) the easy gains are behind us; and 2) the indices will likely move sideways to higher but in a more choppy fashion. If a market top comes out of this consolidation, it is likely to develop over the next several months. In general, market tops are affairs; market bottoms are events.
The S&P500 is now 15.39% above its simple 40 week moving average, and this is the highest value since April, 1999. Figures 1 through 5 are weekly graphs of the S&P500 going back to 1970, and the indicator in the bottom panel looks at the current price relative to the simple 40 week moving average. The black vertical lines highlight when price got more than 15% above the simple 40 week moving average, and this is would be when the indicator in the lower panel got above the maroon colored horizontal line .
Figure 1. S&P500/ 2001 to present
Figure 2. S&P500/ 1997 to 2000
Figure 3. S&P500/ 1986 to 1990
Figure 4. S&P500/ 1981 to 1985
Figure 5. S&P500/ 1971 to 1976
For the record the NASDAQ 100 (symbol: $NDX.X) is now 21% above its simple 40 week moving average, and this is the highest reading since September, 2003. The Russell 2000 (symbol: $RUT.X), prior to today, was 20% above its simple 40 week moving average, and this is the highest value since January, 2004.
And lastly for the record, this is my first contribution to Zero Hedge. I know I am not as provocative as the others, but I deal in numbers. So just the facts is all I ask. No hype and no dogma!
Nice post. Keep 'em comin'...
good chart here
http://dshort.com/charts/bears/four-bears-large.gif
Example got lost in above comment. Here it is
img src="logo.gif" height="100" width="100"
No need to shrink images. Just edit html. Add these attributes height and width attributes to img src tags for each image.
Example
Forget all this...I believe in testicle analysis...if you have the balls, you're making money hand over fist in this market. Every important signal has been a counter indicator in this market so should be ignored. By the time you see a drawdown big enough to make your balls shrink, that's when you should get out. But by then you would have made so much money that it won't matter.
I would agree that since late April almost every sign of a top has been kicked back in the bears faces; that is, when the market does something other than you expect, than look out, and I guess this is the way it has been for 8 weeks. But even this silliness will end at some point in time.
If you note from the article, I don't argue for a top -just that the trend will likely flatten out; I suspect we will have an upward bias that is choppy.
Thanks Tech-Take. An eye opener. If we follow historic patterns, this rally will be longer than I expected. (My gut said Oct. crash, but now I'm not so sure.) Do you know if the 1930 bear rally has been charted? ?
nice to see tech columns.
in addition to looking back on the historical S&P, try taking a glimpse into what i think is a possible future. check out the nikkei225 weekly from 1990. if you're trading equity index methods, how do they stand up to that?
Why is Bruce Krasting always on the phone? Who is he talking to?
Sweetius Motius
Just right click on any image above and select view image to see full image.
June 30th was almost two mother-f**king months ago.....
Are you kidding me.....this is "tradable" news?!?!?!!?
UGH!!!!
BTW, track the 4 week EMA. Top won't be in till we go below it and it goes below the 10 wk EMA....just some thing for you to backtrack. Ride 'em!
nice work..thx
Good piece. Welcome to the contributor page. We share something else. Problems with graphics. Yrs are excellent but they are chopped up by the page layout. Either Marla has to teach us or ZH needs an 'easier' insert system.
You can resize in whatever graphics program you have before you upload. Resize to whatever pixel dimensions you want, the above are 1024 x 588, about half of that (512 x 294) might be about right. You might lose fine text...
It's a PITA, I know, but it will work.
Thank you guys for your posts whether the charts are too big or not!
Late to this offering.
I have seen this type of discussion on John M's site. They are helpfull for the LT looks. I believe that with the gov't involvement in the economy right or wrong, will have a great effect on TA and FA, both giving a hard to interpret readings. That said, the congruence of the Dow, Nas and S/P price movements are indicative of the difficulty we face.
Thanks for this nevertheless.
Will work on those charts...I tried to shrink them once but got a little frustrated with the editing function. I will give it a go again
couple of questions from a TA novice.
I have seen a lot of Robot's charts over the past 4 - 5 months. Why did you chose SMA in place of EMA?
It seems the MACD panel on the charts at stockcharts.com provides the indicators you mention in your charts. Are these one and the same?
With stockcharts.com, use PPO and set it at 1,40,1, and that will give you a single line showing percentage above/below the 40-period moving average - but it's EMA, not SMA
You can detect extremes (like is being emphasized here), divergence, and of course mean reversion to that moving avg
thanks for the tip.
I went to stockcharts.com after reading the discussion of TA spurred by Andy's post "Is the top mightier than the bottom". After experimenting with the charts I realized it was RSI not MACD providing similar information in the charts of this post. I'll read the online help to determine differences between RSI and PPO.
this may help you also.
http://tadoc.org/
i recommend reading the formulas and descriptions, but ignoring everyone else's methods of interpretation.
"Are investors being taken for another ride?"
No, because there are no "investors" in these markets there are only gamblers, speculators, charlatans, liars, sharks and thieves.
give me a break. 'investing' has always been a gambling / speculating. you want certainty then stuff the $ in your mattress. and even that it snot certain. buy wine. at least you can drink it.
the point of the comment is really that with all the uncertaintly the markets should be crawling up, but they aren't. because they are manipulated. I don't have to insult you because the comment does it to yourself
Thanks 37105. “The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.” – Warren Buffett; August 6, 1979 (when the S&P 500 closed at 104)
How can you say that ?? One decade of stock market earnings
erased ! Is that not long term for you? Geeee ...
This is trader's market, and will be even more so in the future!
The only "winning trade" long term is to short any double short etf and watch the decay before your eyes....