Sunday, August 14, 2016
SPX (S&P 500) and COMPQ (Nasdaq Composite) Daily Charts 150 MA Slopes Dictate Cyclical Bull Versus Cyclical Bear Markets
The slope of the 150-day MA is a very useful tool for identifying a cyclical (weeks and months, sometimes a year or three) bull market versus a cyclical bear for any stock or index. If long a stock, you want the wind at your back so you want an upward-sloping 150-day MA which represents a cyclical bull. if you are short a stock, you want the 150-day MA to be sloping lower to show that you are trading in sync with the negative trend.
The S&P 500 chart is the same as the Dow Industrials. These two major indexes show the strong cyclical bull market continuing through the May 2015 top in the stock market. In August 2015, the 150-day MA slope turned negative ushering in a cyclical bear market. That lasts until late March this year when a cyclical bull market came back in play and remains. Market bears obviously need to roll the 150-day MA back to the downside but by definition, this will only occur if price moves below the 150 to drag it down. The bulls are celebrating their good fortune and most of all their rich Uncle Fed that always assures higher stocks to make the wealthy richer.
The COMPQ (Nasdaq Comp) and RUT (Russell 2000) behavior is represented by the COMPQ chart. Note how tech and the small caps are not as joyous as the broad market SPX and the Dirty Thirty. Interestingly, you can almost make the case that the 150-day MA continues to trend negatively. However, at the right side of the chart, the 150-day MA is moving higher so you would deem it a cyclical bull market pattern. Bears will need the COMPQ to drop under the 150 to pull it lower and roll it over to begin another cyclical bear. For now, the bulls are happy. You should review the 150-day MA slopes for all of your stock positions to see if you are trading with the wind or against the wind. 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.