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The chart below shows that over the past 3 years stocks declined 3 2 out of 4 3 times when the percentage of S&P500 stocks above their 20-day moving averages began to decline after having reached the 85% level (smoothed with a 20-day MA). The three two smaller ellipses show periods where the market declined within 6 weeks of this indicator turning south, and we’re already 3 weeks into this phase. Caution is especially warranted.

Comments (4)

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1. Brett Steenbarger said:
Friday, 29th Oct 2010 at 9:32 am

Excellent work on the site, Mo. Particularly helpful has been your view of new highs and new lows. Notice how those topped mid-month and did not confirm the most recent price highs in the S&P 500. Such divergences don’t guarantee a bear, but do support your note of caution.

Brett Steenbarger

2. Mo Shaarani said:
Friday, 29th Oct 2010 at 12:01 pm

Thank you Brett. It’ll be interesting to see how this one unfolds over the coming weeks.

3. Brett Steenbarger said:
Sunday, 14th Nov 2010 at 9:10 pm

Thanks for making data available to subscribers, Mo. Great resource!


4. Mo said:
Thursday, 18th Nov 2010 at 4:31 pm

Thanks again Brett. Hope you continue to find the site useful.

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