Hi, I've been looking at this chart of the S&P500 vs the % of stocks above their 50-day moving average for weeks now and it looks almost like the we are about to see a rally like that in August. But I'm torn because in August, we had a rate cut. It doesn't look like the fed can do it again soon. So, what sort of rally could we expect? http://www.indexindicators.com/charts/sp500-vs-sp500-stocks-above-50d-sma-range-3years/
Similar to the summation index I posted on other threads. Many of the bounces were not due to rate cuts, although as you pointed out, I think the last two were. Never underestimate what they can pull out for bonuses at the end of the year is the way i see it. Many other sentiment indicators are pointing out we are close to a bottom IMO. Of course you have to determine what drawdown you are willing to tolerate, should you choose to bet on these indicators continuing to be reliable, then stick to the stop/drawdown pt. you have predetermined you will exit. A good example of classic indicators that failed miserably are the COT reports. Net commercials were the longest they ever were at the top and look what happened, the large specs dumping were the correct ones. I figure once too many people find ways to interpret the numbers, they'll start to find ways to mask their orders and fool the outsiders.
98 has it right. Lots of people are seeing a pending low in a variety of indicators including sentiment at this point in time. Many are now getting long on this basis and will likely get flushed in the next sharp move lower which will in fact put in the bottom but just later and lower than they expected. They will likely be weak and sell out....yeah at the lows. Patience, give it a couple of weeks and then reassess the picture. The best opportunity will be if we get a flush or a W bottom and then some higher highs and lows then itâs time to get long. I expect new all time highs in order to catch many off guard and in order to get those sentiment readings inverted for a final Bull market top and selling opportunity.
The only indicator that's giving me a cause for concern regarding a bottom is the put/call ratio 20-day moving average. It was quite a bit higher back in August when that bottom was set. http://www.indexindicators.com/charts/sp500-vs-put-call-ratio-total-20d-sma-range-3years/ This tells me that there is still some bullish complacency out there. But, given that the majority of the other indicators are pointing to an imminent bottom, maybe we'll get a short-lived bounce followed by a rapid and sizable decline (capitulation), which will mark the bottom for the next few months. I could be wrong of course.