Wednesday, March 25, 2009

Market Sentiment: Watch % of Stocks above 200-day MA

So far every attempt at a rally has been battered down by the weight of negativity in the market place. During this time sentiment has fluxed with the exception of one market indicator - The Percentage of Stocks above the 200-day MA. Since last September's collapse the percentage of stocks trading above their 200-day MA has failed to break the 10% mark as other sentiment indicators oscillated. Markets have now reached a stage where this threshold is under threat. If it can break it will suggest a desire on the part of buyers to see past the short term and look more positively at holding stocks over the long term.


We may be seeing the early stage of this break in the Nasdaq - a very positive development given the tech sector's importance as a lead out in an economic recovery.


How is this of use? The next leg down in the Bullish Percents / Percentage of Stocks above the 50-day MA / Summation Index will provide the basis for a low risk buy. March lows will provide the basis for the stop, so next it is matter of assessing at what point to this one will want to enter a position; do you wait for a 'buy' trigger in the aforementioned indicators or does one look to 'buy' when the market gets within 3/5/8% of March lows?

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website
 
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