|
Reading the condition of the stock market
Monday, June 20, 2011
by Paul Thornton of Investor Boot Camp Online
|
|
Traders of all types are looking for significant insight the condition of the stock market. The market averages may be the simplest indicator but the averages don't present any information on extremes. Ideally, some tool or indicator that provides a measure of historical extreme is useful for being prepared for a turning point in the trend. The number of stocks under, or over, the 200 day moving average is a good indicator that is overlooked by too many traders. When conditions have been bullish for some time more than 80% of all N.Y.S.E. traded stocks will trade above their long term trend line. In February 2011, it peaked at nearly 84% and remained above 80% until early May.
Now you can see from the chart below it has plummeted, through June, to just above 50%. But it's not yet at extremely low levels associated with market bottoms. 
During the correction in 2010, the number of stocks above their 200 day moving average dropped to nearly 30% in early July. The market did not bottom out however until August 31st. The "flash crash' was early May when European debt default was an issue as it is now with Greece. The deterioration in the early days of the 2010 correction looks similar to the rapid decline we're seeing in June of this year. 
Sentiment indicators have deteriorated but aren't near the historical extremes that coincide with market bottoms. Not unlike the mindset of investors at the time of the "flash crash" it doesn't feel like investors have turned into bears. Stocks have logged gigantic gains since early 2009, so a consolidation of some significance would not be out of character for the market at any time. We monitor the level of stocks above the 200 day moving average , amongst other indicators, on a regular basis. Key stocks and markets action is highlighted in a charts slide-show. Nice and easy for traders to find out what's going on in two minutes. www.investorbootcamponline.com
Investor Boot Camp Online is an investment information service for investors who manage their own portfolios, investment advisors and fund managers. Extensive research with historically indicated trading behaviours and cycles research are incorporated into a trading system that provides investors and traders with precise buy and
sell prices. Market timing is the key to the research developed over twenty five years. Visit us at www.investorboorcamponline.com.
Recent articles from this author
- Stock Market Consolidating - Friday, April 13, 2012
- Reading the condition of the stock market - Monday, June 20, 2011
- Pump Up The Profit - Wednesday, May 11, 2011
- Break Outs Are Key Indicator - Monday, May 09, 2011
- Silver Hammered - Monday, May 02, 2011
About the author
Paul Thornton
Investor Boot Camp Online
Trading and money management experience: 24 years Paul Thornton is the Director and Chief Research Strategist with Investor Boot Camp Online. Paul is an expert in market timing and trade execution strategies. He is frequently on national television and other media for his market insights and investment strategies. He is the author of Boot Camp Banter with commentary on markets, the economy and business that is rarely heard. He is also the creator of Baseball and Investing which is an ongoing series comparing baseball to the management of investments and portfolios. He is well known and respected as a leader in investor education. Classrom seminars include Investor Boot Camp, Influences in the Stock Market, Understanding Investor Behaviours, Bases, Fixed Income Investing and the Advanced Investor Workshop are popular investment seminars. Investor Boot Camp Online is the premier independent online investment information service. The extensive information is used by investors who manage their own portfolios, investment advisors and fund managers. Trend changes are identified before anyone else and the top performing markets and stocks are identified at the beginning of up trends. Protecting capital in corrections has separated Paul from many other investment market experts. Research and strategies cover all North American equities, bonds, E.T.F.’s, commodities, income trusts and currency markets. The Investor Tool Kit is one of the largest investment resources available with information for both the novice and sophisticated investor. Mindset management is provided to help investors "keep their head on straight". Tips on Investing in Financings and Junior Resource Stocks are popular series with critical insights. Don't be fooled by the name Boot Camp. Experienced and disciplined investors may be the biggest beneificaries of trade indications and trade templates. Paul created the "Trade Risk" indicator which is a measure of the reliability of transacting in the stock market. His passion is to find the next great trade, as well as convince investors to sell at the beginning of corrections and keep them out until it’s over.
|
