Tuesday, July 8, 2014

SPXA150R S&P 500 Percent of Stocks Above 150-Day MA Daily Chart Signals Significant Market Top

The percent of stocks above their 150-day MA's hit 89% two days ago a very lofty and extremely elevated level. The peaks in SPXA150R identify market tops since once near 90% of the stocks are above their 150-day MA's, there is no further room to move higher. The remaining 10% of stocks not above this critical moving average are likely not moving higher for fundamental reasons. Hence, market selling occurs, since the high prints have topped out. Also of interest, note that the price is above the 20 MA above the 50 MA above the 200 MA so a mean reversion is required with the upside joy stretched to the upside.

The red lines show the negative divergence that creates yesterday's spank down but the RSI is exhibiting long and strong behavior over the last few days. Thus, bulls may try to squeeze out a bit more juice but this would only create a matching top and further negative divergence which would begin the more extensive down move in stocks.

A SPXA150R above 90 is a pure gift to short-sellers. Price was only a buck away at 89, and even now at 88, the short side is a very prudent place to be. In light of the analysis above, index shorts can be brought on immediately and simply keep further capital available to scale-in with more shorts, aggressively in fact, if the SPXA150R exceeds 90. Price may never reach 90 so the top may be in already. A reading above 90 is where the piggy bank can be broken and even Aunt Edna's broach can be pawned to generate funds to bet the house on the short side. These readings above 88 will lead to a market selloff. Note that January's top, and April's top, are clearly identified by the SPXA150R exceeding 85. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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