November 8th, 2010
The run since August has been fantastic so I have no intention of looking a gift horse in the mouth but …. there is only one thing that could make it even more perfect.
As you know, I use four moving averages for gauging market momentum and have incorporated data about the historical performance of those indicators into my Market Timing Indicator. A perfect bull alignment, the Apollo 11 Augury, is when the S&P 500 Index is above the 50-dma which is above the 100-dma which is above the 200-dma with the 300-dma lagging and under them all. The alignment augurs well for a bull run that could take the market to new heights.
How often do these alignments occur and why are they so important? Glad you asked because I have the statistics going back to 1963. Because the market is in a bull mode most of the time it’s not surprising that the Bullish Alignment is the most common of all the possibilities arrangements of the moving averages. Actually, the moving averages were in Bullish Alignment 49.1% of the nearly 12,000 trading days since 1963, more than any of the other possible combinations. Of that number, the Index itself was above them all 73% of the time.
For comparison purposes, the Bear Market moving average Alignment was the second most frequent alignment occurring 11.3% of the trading days. Unfortunately for us, many were since 1999 during the Tech Bubble Burst and the recent Financial Crisis Crash.
Why am I boring you with this interesting but arcane information? Because the market is about to put the final nail into this bull market recovery by completing a Bullish Alignment of the moving averages (click on image to enlarge):
The 100-dma is rising quickly and is about to converge and cross above the 200-dma. When the cross takes place, the Index will be above the moving averages which will be aligned 50/100/200/300. At the rates the 100-dma and 200-dma are rising (1.1 points/day and 0.65 points/day, respectively), the cross should occur in around 20 trading days, or December 8. Because these are long-term moving averages, putting aside the possibility of a catastrophic market event, the cross is inevitable almost regardless of what the market does during those 20 days.
Although there are no guarantees when it comes to the market, that will be a happen day and I’ll be able to approach 2011 with even more confidence.