Many investors watch things such as 50 day moving averages, and 200 day moving averages. The 200 day moving average is considered important by many because it is considered a level where Institutional Investors initiate program buying or selling.
On a Monthly chart, I like to use a 6 month Weighted Moving Average plotted against a 12 month Simple Moving Average as seen on today's chart below.
(Actually, I use these Moving Average settings in conjunction with a MACD, MACD Histogram, a Stochastic Oscillator, and a C-RSI Strength Index in order to predict the shifts in and out of Bull and Bear markets. For those who want to explore this model and indicators further, they can watch the 10 minute How-To video at: http://www.stocktiming.net/short-video-seminars/ )
Before looking at the video, take a look at today's current monthly chart of the S&P 500. Pay attention to how the Red and Blue trend lines cross over when a market shifts from a Bull to Bear, or a Bear to Bull market condition.
When you look at today's chart, observe two things ...
1. That the Red and Blue trend lines are now merged, so this is a testing point for the Bull market. This is the second time the Red line has touched the Blue line during this Bull market. The reason we point that out, is that the two previous Bull markets on the chart, also had two touch points before the market went on further for its third and last legs up (before turning into a Bear market). *** This time, there is a difference in this merging of the trend lines, because the C-RSI is now negative while it was positive during the same event in the past Bull markets (the C-RSI reading is not shown on this chart, but it is shown on Our Advanced and Standard web sites in Section 5 and updated weekly).
So, that says the market stress level at this stage is much higher it was at the same stage in previous Bull markets.
2. Another important thing to note is the historical importance of the 1103 S&P level. Take a quick look at the chart and you will see that it has historically been a level where the market consolidates and re-tests the existing trend.
In fact, we were at that point two weeks ago when the S&P dropped to 1101.21 which was 0.1622% below the 1103 level. Therefore, we are back to that critical 1103 level where trending below it would indicate a new Bear Market ... and for the Bull to resume, we will need to make a new high above May's highest daily tick level.
So, this is a testing level, and if you look at the chart you will see that prior testing events of this level took at leas two to three months to work through. So the message on this chart is to be cautious and patient while the market tries to heal itself from the recent damage.
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The Big "Bull/Bear" Picture ...Posted on March 9th, 2009
Investors need models of various time periods to trade the markets. While most investors look at daily and intra-day charts, most avoid focusing on the longer term.
While the markets will fluctuate on a daily and weekly basis, we find that 'Monthly" charts give the best picture of when a Bull market starts and ends.
It is also the best time period for tracking Bear Markets. Not knowing when a Bear market starts and ends can financially hurt investors and wreck havoc on their retirement plans.
The Long Term Bull/Bear Model for the S&P 500 ...(Updated weekly on our Standard Site - Section 5)
This is a monthly chart for S&P 500. To signal changes in Bull and Bear Market conditions, we use 3 indicators: The MACD, a MACD Histogram, and a Stochastic Oscillator.
What signals has the Bull/Bear Model given?
First, on March 31, 1995, the Model gave the signal for a New Bull Market. That signal lasted until November 20, 2000 when it became time to exit.
And then, On November 20th. 2000, that was the signal for a new Bear Market. That Bear Market lasted until May 31st. 2003, at which time our Model signaled that it was time to exit the Bear Market.
The beginning of our last Bull Market was therefore signaled on May 31st. 2003. That Bull Market remained in force until January 31st. 2008 when a down signal was triggered.
That brings us to where we are now. The current Bear Market on this model started in January of LAST year. You don't have to be a rocket scientist to look at today's chart and see that we are still in a Bear Market.
While this model explores the long term, there are weekly and daily fluctuations in the market. Typically, a Bear Market will have 4 to 5 instances where the S&P will move above our red trend line. That has only happened twice so far. The last occurrence was last September. So it has now been 6 months since we have seen the monthly bars rise above the red trend line.
From a weekly or daily perspective, these periods can give some nice upside trades. As of last Friday, the monthly Stochastic Oscillator showed a very oversold condition. With that condition, it shouldn't be too long before we see a Bear Market rally. Remember that this is a monthly chart that we update weekly .... not a daily chart.
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