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| T2108 1998-2008 |
Using below 20 as the threshold, between 1998 and 2008 what stands out on a monthly perspective is the threshold for the percentage of stocks above their 40 period average was clipped three times. Each of these occurred during a significant market move to the downside. 1998 occurred during the pivot low for that correction. A bounce followed 2001 and established a pivot low but did not establish the market low for the entire correction. 2007 happened close to the all time high and was a prelude of things to come down the line.
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| T2108 2008-Present |
Between 2008 to present there have been four dips below the 20 threshold. The 2009 dip sealed the market low. The 2010 flash crash period established another market low. The correction of 2015-2016 had a significant lag time before the market bottomed and resumed an uptrend. Recently there has been a dip below and it remains to be seen how this will play out. However, another dip below is looking like a strong possibility.
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| T2107 1998-Present |
Since 1998, on a monthly perspective the percentage of stocks above their 200 period moving average has dipped below the 20 threshold six times. Three times this occurred during the bottom, and three times this occurred during the bottom process as price continued to drag and the markets continued lower.
Using these past occurrences as model to asses future probability, I expect there will be more downside in price. I'm also expecting this to last longer than historical average in duration. Moving forward, I'll be placing slightly less influence on how stocks above their 40 snap back as they've been shown to move between extended to the downside to the upside earlier than the market bottom. What I'll be more mindful of over the next few weeks is how deeply the number of stocks below their 200 moving period extend below the 20 threshold and how robust any snap back rallies are. The snap backs with velocity from below 20 have more closely aligned to turning points.
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