NYSE % of stocks > than 200 Week Moving Average

Earlier today, this went out to our research clients:

Last week,
we noted the % of NYSE stocks trading below their 200 day moving
average was about 23%. That suggested we were close, but not at a
tradeable low.

Today, our trusty Bloomberg terminal is showing just 13% of NYSE stocks trading above their 200-day moving averages. 

That is lower than anytime in the 2000-02 bear market. And lower than anytime in the 1998 and 1994 bear markets.

This indicator is saying that sentiment has become excessively
negative — considering we are only 3 months off of the all time
S&P500 highs.

This suggests we should begin the counter-trend rally shortly. We
would expect this to last anyway from 2 weeks to 2 months, run 5-15%.

We also would use this upcoming lift as an opportunity to sell equities.

This is a bounce, not a major shift in trend . . .

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What's been said:

Discussions found on the web:
  1. sebs commented on Jan 23

    now you tell us…

    lol

  2. John Borchers commented on Jan 23

    I’m in for it. Switched to bull mode today and already quite profitable. That’s the best luck I’ve had to date.

    I think the gov’t is going to have to protect the baby boomer’s retirement money at all costs. That’s what got me to switch today. I don’t see us falling anymore near term. With the market sentiment going back up this should move the consumer confidence back up.

    Yesterday at work everyone was worried about their retirement portfolios. That was key to me we were close. I work with a bunch of baby boomers but am only 33 myself.

    I would not be surprised to get a few negative numbers going forward. The market really changes people’s perception. But bottom line they are buy points not sell points.

    The Gov’t will do anything to prevent the system from collapse. After all if the system does bust shorts won’t make anything either.

  3. cathompson commented on Jan 23

    i think you meant above the m.a.

    ~~~

    BR: Doh! I fix above

  4. mo commented on Jan 23

    What sebs said.

    I sold a couple of clients’ Mutual Funds late yesterday when it looked like things were going to close down about 0.50%.

    It looked like a smart move on my part until 3:00 this afternoon.

    duh

    Oh well – now where do I put that $$$?

    Thanks for a great blog!

  5. me2 commented on Jan 23

    The problem with using those measures as a means to say that the market was “excessively negative” is that they don’t take into account the depth and severity of the upcoming economic issues, ie the credit crunch.

    *IF* the Fed hadn’t cut 75 bps and if the State of NY hadn’t started looking into “fixing” MBIA and AMBAC, there would be no reason for this market to rally. I was just beginning to think that stock valuations were coming into line with what future earnings are going to look like. Just look at what Apple reported. I don’t think they are going to be an anomaly for this earnings season. I bet a lot of retailers missed their numbers in Q4 2007. I suspect Bernanke knew this and thus wala the 75 bps cut.

    However, we have a new force in the market: government intervention. The Fed has shown several times now that it doesn’t care anything about inflation, all that matters is growth. We know that Bush, Dodd, et al are ready to jump into the various markets with “solutions”. We also know that it looks like public money is going to save AMBAC and MBIA.

    It is very, very hard to be a bear these days. Yes, we deserve to be in a bear market, by traditional metrics. But these aren’t ordinary times ! Based on what I have seen, I think it is time to buy even though traditionally I wouldn’t. In effect, I am on the verge of becoming a gov’t backed permabull. Sad but true.

  6. Barry Ritholtz commented on Jan 23

    I agree.

    As we have said last week, its not a precise measure. But its worth tracking, along with other metrics.

  7. Sami commented on Jan 23

    you talk about timing the market as it is fruitless endeavor but then again here you are doing it no less. So I am not sure to which Barry to listen to.

    great site btw

    ~~~

    BR: I thought it was pretty clear in the interview and the Street.com column that this sort of action is for institutions and pro traders who have the discipline to take the loss when necessary.

  8. tekel commented on Jan 23

    that’s all well and good. But with the underlying solvency problems, is this more like a 2003 bear market, or more like an early-1930s bear market?

  9. me2 commented on Jan 23

    Why don’t my previous comments have paragraph breaks ? I put them in !

    I am really interested to hear what NY State is going to do with AMBAC and MBIA. I suspect they want to loan them capital to bolster their balance sheets to allow them to keep their AAA rating. The problem being that if they lose their AAA rating, holders of debt insured by them are going to have to revalue that debt and take losses.

    So in effect if the state supports them, everyone wins. Or do they ?

    Lets say the state lends them money and they keep their AAA rating. Lets say that the mortgage debt market plays out, losses occur and AMBAC and MBIA have to make payouts. What happens then ? They have no where near the capital to make significant payouts. Is the Fed or the state going to step up again ? If they do, they are effectively insuring MBSes ! We then have the Fed/ Gov’t backing Fannie and Freddie, providing bailouts and backstopping MBS losses ! What’s next ? Maybe the Fed will buy me a house ? :rollseyes:

    I look forward to your views on this.

  10. kk commented on Jan 23

    I guess it will be a better time to get into equities when they are higher and the trend is clearer. Makes sense to me.

    AAPL was cheaper @$190 than $125 right? I think I am getting it. Time to buy the 10 yr.

  11. VJ commented on Jan 23

    And DOWN the stretch they come…

    Ohio Attorney General Sues Freddie Mac: Mortgage Securities Fraud

    (Reuters) – An Ohio pension fund filed an investor class action lawsuit against Freddie Mac, accusing the mortgage finance giant of securities fraud for failing to disclose risks from its investments in the subprime mortgage market.

    Ohio Attorney General Marc Dan, who filed the suit in U.S. District Court, the Northern District of Ohio, on Tuesday said Freddie Mac had “secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times.”

    According to Dann, the Ohio Public Employees Retirement System suffered losses of up to $27.2 million as a result of the fraud. Attorney General Marc Dann said in a statement the company improperly bought risky home loans that fell sharply in value and led to huge losses for Freddie Mac.

    Dann said Freddie Mac, a private company that holds a federal charter, was “deeply invested in the subprime mortgage industry and failed to disclose that it was not protecting itself from the billion-dollar risks it incurred.”

    REUTERS LINK

    .

  12. me2 commented on Jan 23

    I got burnt twice this week. First with the 75 BPS cut. Then with the NY State AMBAC/MBIA bailout rumor. I need to fine tune my strategy to include government intervention. I’m pissed.

  13. The Dirty Mac commented on Jan 23

    “But with the underlying solvency problems, is this more like a 2003 bear market, or more like an early-1930s bear market?”

    Even if you think its the latter, you might want to hedge your bets in case you are wrong.

  14. me2 commented on Jan 23

    YOU CAN’T FIGHT THE FED !

  15. dukeb commented on Jan 23

    Liesman is an annoying goofball. His habit of forcefully injecting the names of other guests into his ignorant, monodimensional, midsentence riffs, STEVE, STEVE, STEVE, drives me absolutely nuts! (Right up there with Dylan’s playground babbling.) The man is a corn flake.

    Santelli for President!

  16. Brett commented on Jan 23

    me2,

    Totally agree. I’ve been stopped out of SRS and SKF (RE and financial shorts) twice from the two events you mention. Free Market Economy vs. Don’t Fight GW’s Fed. Oh well no worries. No $$ lost as they were trailing % stops and my enteries were lucky. Now I just need to decide how much longer the govt. wants to keep this car perched on the side of the cliff afore letting what needs to happen, happen. I saw a post or rather a sig on another board that was something like: “I can remain rational longer than the Fed can keep cutting rates”. I kinna liked that so I’ll look to re-enter the posn mid-day tomorrow depending on where we’re at. Good luck to ya’ll

  17. dukeb commented on Jan 23

    Whoops….that previous post was for the CNBC clips comments! Duh!

  18. tekel commented on Jan 23

    “you might want to hedge your bets in case you are wrong.”

    sure. But how do you hedge when you’re living in your first house, which you bought in the summer of 2006?

  19. me2 commented on Jan 23

    “I can remain rational longer than the Fed can keep cutting rates”

    I’ve got the same feeling. These measures are just band aids, unless the Fed gets to wielding $1T bailouts. And if that happens I suspect global market forces will intervene.

    Nothing is going to save the country from the repercussions of the RE bubble. Unless something is done about the glut of unsold homes, market forces are going to set house prices and the losses are going to be massive. And that will play out in the mortgage market and ultimately the credit market.

    Ultimately we are going lower. The Fed/gov’t actions only delay the inevitable.

  20. jag commented on Jan 23

    tekel: maybe the Ultrashort Real Estate (ticker: SRS) is your hedge?

  21. Jim Haywood commented on Jan 23

    Oh gawd, me2, that YouTube clip is so sweet. LMFAO!

    President, hell … SANTELLI FOR FED CHAIRMAN !!!

  22. me2 commented on Jan 23

    Actually, Rick took on Leisman (sp?) twice today. That will probably show up on youtube tomorrow.

    BTW Cramer just called a bottom. Said we retested yesterday’s opening lows. He is saying this is the start of a new cycle. I guess its all up from here !

    I can’t wait to hear what Kudlow has to say. I don’t know how Barry can stomach him.

  23. Eric commented on Jan 23

    MS, what happened pal, I thought the world was coming to an end.

  24. craig commented on Jan 23

    anyone else thinking that (>50% chance) the long-term trend for major indexes is flat to materially down over the next 6-24 months that this is (>50% chance) a tradeable rally for 3-10% then incrementally roll out of longs as we rise and perhaps go cash or short if the rally goes over 10% from here?

    and if so…anyone thinking that financials, banks, homebuilders, retailers prob rally the most (even if it’s just sentiment and not good fundamentals driving it?) after the emergency fed cut not helping me this week, i’d love to make something work for me over the next week to 2 months.

  25. Winston Munn commented on Jan 23

    This is simply a temporary validation of the permabull’s position.

    Only crashes go straight down; bear markets trend down; but along the way, there are always plenty of entusiasts around to declare a bottom.

    You’ll know the bottom is close when shows like Mad Money are cancelled and replaced with reruns of I Love Lucy.

  26. Brett commented on Jan 23

    Yeah but Centex (CTX) up like 20% in ONE SESSION?!?! Is that not absolute INSANITY?!?! Who would be buying that up right now and who is the guy who went ahead and said at 19.5% “My!! That’s a deal! Lemme get in on that action!” And placed the bid to send it tha full 20.7%?? I’ve never played an individual short before (stuck to the ETFs) but I think tomorrow may be my first. WOOKIES ON ENDOR!!!

  27. Grodge (aka Tony) commented on Jan 23

    One problem with the 200 day MA metric is that for most stocks, the 40-day MA has flipped lower than the 200-day, meaning that the market is more bearish than the last time Barry looked at this value.

    For a longer discussion:

    http://tinyurl.com/28mz7q

    My surmise is that while we may be in for a bounce, it will be muted without some exogenous event, like an ECB rate cut.

    Be careful.

  28. kd commented on Jan 23

    bounce not trend change… I think the next few days will be a good time to pile into QID SDD and SDS if its green.

  29. Aaron commented on Jan 23

    13% is an astonishing number. The new highs to new lows number was also astonishing earlier today. At around 1 pm there was somewhere around 150 new lows on the Nasdaq to 1 new high. Wow.

  30. Street Creds commented on Jan 23

    Lucy, you got some ‘splaining to do!

  31. AGG commented on Jan 24

    Profiting in a Bear market is like log rolling in white water. It’s possible…

  32. Justin commented on Jan 24

    By Friday we’ll all be saying, “Hey, where did that bounce go?” This aint no ordinary bear, Booboo.

  33. Peety commented on Jan 24

    Can somebody please tell me how I can look this up in Bloomberg? thank you

  34. BDG123 commented on Jan 25

    It’s a good start to be on the lookout but my trading system isn’t even close to issuing a buy signal. I’ve spent half my life time developing something to keep me out of times like this. And, the exogenous issues could very well prevent us from a rally.

    Rallys happen when institutions are in control and can rally a bear market for profit and to unload their mistakes to suckers. This time, it is Wall Street that is holding the bag.

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