• SPX 12% Above 200-day MA? Time to sell?

    by  • May 17, 2013 1:49 pm • Breaking News, Broad Market Analysis, Charts to Watch • 1 Comment

    It is expiration Friday, so we’re a little busier around here.  Here are a few thingsthat I’m currently watching and will be worth paying attention to over the coming weeks.

    The NAAIM survey is coming up on some long-term resistance.  I like this poll because it is what active managers are doing.  In other words, not what a retail investor thinks, but what a manager is actually doing.

    It is up to 84 currently.  As you can see, going back since 2009 this area has been the site of some major peaks.  In other words, they were fully invested.  Now the caveat is this surged over 100 back in January and that did little to slow down this rally.

    So be concerned, but the bottom line is the trend of this survey is what is important.  It is still moving higher and that could suggest money managers are still putting money to work.

    Turning to a popular investors sentiment poll, the AAII poll saw its bulls actually drop over the past week.  Given we’re making new highs nearly everyday, that is promising from a contrarian point of view.

    What I really like though is the 10-week MA of the bulls is down near the 32% area and turning higher.  Similar trips down to this level have been great buying opportunities.

    Lastly, there’s been a lot of talk about how the SPX is 12% above its 200-day MA.  In other words, we’ve gone too far too fast and a pullback is due.  Well, turns out this could be true.

    Going back to 1975, this has happened 54 times and the near-term returns across the board are weaker than the at-any-time returns.  They aren’t a huge sell signal either, but it could suggest some consolidation after the big move.

    Digging in on the recent examples, the past four times this has happened the SPX was down two months later every single time.  The flip side is the four times before that, it was up two months later four for four.  Of course, all of those instances occurred in 2009 off of a historic market crash.


    One Response to SPX 12% Above 200-day MA? Time to sell?

    1. Jeffrey Heath
      May 20, 2013 11:06 am at 11:06 am

      Interesting, but run your prose past someone who writes well.

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