I submit to you the above graph showing the percentage of stocks trading above their 20, 50, and 200 day moving averages.
These percentages have been slowly rolling over for the past month or so while SPY continues to climb.
The indices will not continue to climb forever while their constituent stocks are rolling over.
The correction has already begun. Look for it to show up in the indices soon.
Not that I don’t generally agree – but I think you’d be hard pressed to show that using that indicator. In my experience, these indicators (which I use along with my own custom version) are really good at showing bottoms, and really tough to read for tops.
Just look at 2010/2011 in your chart up there. Plenty of times they’ve rolled and yet not caused a major selloff.
I’ve tested it in the past and found it not very good – have you ever run a backtest on it?
Damian, perhaps we are in disagreement about what it is showing. I’m saying it is indicating that pullback is near. Perhaps correction is too strong a term. I’m definitely not expecting a major selloff. I have backtested various iterations of it. Honestly I do not recall the specifics but that is because the results did not stand out.
I don’t think we’re disagreeing at all – I see now you’re talking correction – which I generally agree on, but my point is that in my own testing, I haven’t found these indicators to be meaningful in terms of determining tops. Would love to be proven wrong!
the 20 goes under the 200,it’s over. i can see where you think that, cause the 20 looks next to go.
sorry should have read the 50. ha.a game
Interesting!
I love it when you rub sand in the eyes of global warming alarmists, Wood. It always lightens my mood.
Why would I trust the same people who’s multi-billion dollar budget depends on temperatures increasing to be frank with me on the subject?
Haha…I’m glad you do. It’s a good debate, and I enjoy it. Thanks MCT!