May 31st, 2008

S&P 500 "Video"

I have a deadline of June 30 for finishing the book I’ve been writing over the past year, “Running with the Herd”. Of course, I think the book is unusual among guides for individuals on stock market investing because I’ve approached the process from the 30,000 foot level. I not only discuss how to use charts to identify investment candidates but also: 1) cover some previous market crashes, 2) describe a market timing tool I developed through back-testing over 45 years of market history and 3) outline a number of simple and effective triggers for selecting stocks with momentum.

It’s a self-imposed deadline but, after working on it for a year, I’ll now be glad to get behind me. You might not think so but this past year has been an excellent one for writing a book about investing. Not only did it offer an opportunity (or should I say need) for refining the Market Timing Indicator but it also gave me something to divert my attention over the past 10-12 months of market decline and monotonous market churning. Plus it forced me to look at what I’d been doing and correct some mistakes I’d been making over the years. I’ll vouch for the truth of the old saying that “you don’t really know a subject until you teach it someone else”.

First, for the state of the market. Five months have passed and we’re essential at the same place we were at the beginning of January … probably not all that bad considering everything we’ve had to deal with…. except for the tone which seems to be improving. Here are graphs of the S&P 500 from various previous postings (click on the dates for charts of the S&P 500):

March April May
1-Mar 6-Apr 2-May
10-Mar 17-Apr 5-May
21-Mar 22-Apr 8-May
28-Mar 30-Apr 13-May

I wish I could make a video of this charts to show its evolution. And here’s where we are today:

The index is just 2.22% below the 180-day and 3.97% below the 300-day. The 60-day has already crossed over the 90-day and both have turned up. The index stayed in the “yellow-light” caution zone for merely one day but it looks like it’s going to make another stab at going over and this time holding (that’s that optomist in me talking). The ultimate goal, the one giving an all-clear signal, is the Index crossing over the 300-day MA with the 60-day MA following on its heals to cross over the 180-day MA.

Many believe the Index staying above the supporting trendline of the earlier channel was sufficient. Some will say the 60-90 MACD is sufficient to call a turn. I’m not going to feel comfortable and confident until we get the sort of flip of the moving averages I described on May 2 in “Precursor of a Healthy Bull Market“. So get excited buy not yet carried away.

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