The Best Ever Stock Market Indicator
InvestorEducation / Technical Analysis Jan 15, 2012 - 10:15 AM GMTBy: PhilStockWorld
Courtesy of Doug Short. The $OEXA200R (the percentage of S&P 100 stocks above their 200 DMA) is a technical indicator available on StockCharts.com that can be used to forecast conservative entry and exit points for the stock market.
See Is This the Best Stock Market Indicator Ever? for a discussion of this technical tool.
The chart below is current through the January 13 close.
After a major S&P correction, the conditions for safe re-entry into the market are when:
 a) $OEXA200R rises above 65%
And two of the following three also occur:
 b) RSI rises over 50  c) MACD cross (black line rises above red line)  d) Slow STO (black line) rises over 50
Interpretation:
OEXA200R remained encouragingly above 65% all week and ended at 69%. Of the three secondary indicators:
- RSI is above 50 and positive.
- MACD has not yet crossed into positive territory.
- Slow STO is above 50 and positive.
Conclusion:
The market has become tradable. However, traders must stay on their toes and keep the following Commentary in mind.
Commentary:
All eyes remain on Europe. Simply put, it is a Pandora’s Box of completely unknown proportions. Europe could muddle through. Or, problems could already be at such a saturation point that a single unfortunate event could be the trigger for another financial avalanche. We simply don’t know. What we do know is:
- There is more than 457 billion euros of Euro zone government debt due to be repaid in the first quarter of 2012. Can Europe withstand that stress?
- The euro continues its downward trajectory against other currencies.
- Sovereign credit rating downgrades occurred late Friday. Greece and her creditors are eyeball-to-eyeball.
- No one has the slightest idea what the derivative exposure of European banks is nor the extent of the bail outs they will most likely need.
- A regional recession seems a foregone conclusion, as does the unraveling of the Euro zone and euro in some form, relatively controlled or not.
- Phil
Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)
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