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Comments

mitchell brown

Fantastic post. The market is about to roll over.
These levels cannot be sustained
By
enlightenedwallstreeter
http://www.enlightenedwallstreeter.com/

yo

wow, when it breaks out, the sky's the limit!

Eric Davs

this one reminds me of when you said the same thing about the 50dma....

you could be right...

Tp

The last time it touched this high a level, the market rallied thereafter. So has to be bullish if history is any guide.

Michael

Very important observation. Many thanks to this blog for pointing it out to the readers.

adan lerma

i'm not a premium subscriber (sorry) but going just by the chart, seems each time the 20% line got touched, the next move was sharply down -

history, of course, is no guarantee of future results, but nevertheless, very interesting bit of info -

thank you much!

Daniel

Looks like your old firm Birinyi is flat out stealing your work now. Just heard Bob Pisani on CNBC just say that Birinyi just put out a note saying the S&P was 20% above its 200-day!

Jon

Hi there - just to add some balance - not sure your data is entirely correct.

On 06/08/1997 the S&P high on the day was 964.17, some 20% (19.81% actually) above the 200d moving average of 804.6558.

While it worked for a month or so, a year later the market was higher by some 13%.

Just on the other side as well, until 2008 27% was the trough on the downside so on that measure wld have been BUYING in October 2008, a few month too early.

Cheers

Justin

Dear Jon,

What data are you calling incorrect? The only data in the text above is that the S&P closed more than 20% above its 200-day for the first time since May 1983. Closing 19.81% above the 200-day in 1997 does not qualify, because it is not above 20%. It's either above 20% or it isn't. I'm also not sure what you mean by "while it worked for a month or so, a year later the market was higher by some 13%." What worked? We don't provide any forward peformance numbers in the post. We also don't mention anything about buying when the spread got way down.

Best, Justin

Jon

Hi there,

Getting into semantics somewhat but 19.81% rounds up to 20% (granted it is MARGINALLY below 20.00% exactly but still rounds up).

But guess that is something we can go round in circles about and neither is ever going to conceed the other's point of view isn't wrong so anyway...

Getting onto the real point - while you are correct in that you don't explicitly say if you think it's bullish or bearish and I don't have access to the premium research, I can surmise the following:

1. Tone of the responses to the article was mixed but one person explicitly states in response "this rally is not sustainable" which is maybe indicative of the spirit in which the article is received.

2. You refer to the great depression in the main body of the article before showing the chart. When people draw this parallel, is is generally not supportive of a bullish view and I am sure the parallel (psycologically and in terms of the percent move) between the rally now and the first one back then - before the gut-wrenching move lower - was not lost on many when they read this piece.

Was just trying to put together a couple of facts to encourage some lively debate, apologies if you took it as criticism of your work (it wasn't).

Cheers

Jon

One quick other thing as well on the thing about buying when the spread gets to depressed levels.

I wasn't trying to suggest you ever said one should buy on the dips.

All I was trying to highlight that things like percentage above 200D tend to be much like selling when RSI above 70 or buying below 30, trading demark 9s and 13s, etc, etc.

Generally they work until one day they don't work, as would have been the case with buying on the 27% divergence back in October.

Cheers

twitter.com/GrandSupercycle

I began to warn people of the impending crash back in *February 2007*


VIX index and USD index are giving some bullish warnings.


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Account Deleted

Hi Bespoke,
I follow your posts.And this is has been an inspiration to me for testing my `trend reversal` MINDFREAK INDICATOR.

Basically my study was to identify MEAN REVERSION TO the 200 DMA after touching peak spread levels.

I have done analysis for Indian markets NSE INDIA NIFTY index. I have taken data for last 18 years that captures the 12 market tops). Peak 200 DMA spread around 40%

I expect NIFTY fall of 15% from peak of 5200 to 4300 by Nov-end based on back testing of mean reversion to the 200 DMA.( still making money based on this indicator as had gone short on 25th Oct`09).have added detail analysis on my blog site httt://saanpaurseedi.blogspot.com
would like to know your views and request you you to do a similar analysis for S&P500. I think you could arrive at similar results.
Regards
Djvu

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