SP500 valuation compared to 200 days MA

[FD1000]

Looking at SP500 + 200 days MA(link) and it looks like SP500 price is stretched based on the past

In 02/2020 SP500 price was about 11% over the 200 days MA.

In the end of 09/2020 SP500 price was about 16% over the 200 days MA.

Now the SP500 price is  about 16% over the 200 days MA.

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[Chahta]

Correction forecast?

[chang]

Dec 30, 2020 14:26:54 GMT FD1000 said:

Looking at SP500 + 200 days MA(link) and it looks like SP500 price is stretched based on the past

In 02/2020 SP500 price was about 11% over the 200 days MA.

In the end of 09/2020 SP500 price was about 16% over the 200 days MA.

Now the SP500 price is  about 16% over the 200 days MA.

I see a series of "higher highs" and "lower lows". What do the chartists make of that? uncleharley Norbert

[FD1000]

Gary: Correction forecast?

FD: no idea, but it looks stretched based on the past.

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I see a series of "higher highs" and "lower lows". What do the chartists make of that?

FD: Higher highs + higher lows define an upward trend.  SP500 price at 15+% over 200 days MA is unique. T/A is a possibility tool not a certainty tool. Since 2009 we found out the Fed have been controlling markets, and they are continuing it in the last several months and their future.

[chang]

FD1000 - not higher lows, but lower lows. "Higher highs" and "lower lows". To a physicist that suggests a kind of resonance that usually ends up breaking something.

[FD1000]

Dec 31, 2020 4:50:19 GMT chang said:

FD1000 - not higher lows, but lower lows. "Higher highs" and "lower lows". To a physicist that suggests a kind of resonance that usually ends up breaking something.

I don't see the above, I see higher lows, see attached

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[racqueteer]

I'm just now looking at this, but it's pretty clear that the first chart posted by FD, which covers a longer time period, shows the "magaphone" pattern to which chang refers.  The latter chart, limited to a shorter period of time which FD posted second, shows instead a rising channel.  So which one takes 'control'?  Seems as if one has to know the optimal time period to use in order to select the proper chart, no?

My feeling, in this case, is to ignore the big drop of 2020 as being an anomaly.

[uncleharley]

I hate to butt in, however I would look at the chart from a somewhat different per4spective stockcharts.com/h-sc/ui?s=$SPX&p=D&b=3&g=0&id=p49984002596&a=412512122&listNum=86 The S&P has moved above the long term and short term trend lines and is for the very short term, consolidating above them. The short term resistance is not yet fully developed and may never be fully developed. My conclusion is that after a brief period of consolidation, the S&P will continue to rally to higher highs. There are a number of economic and non-economic issues that are overdue for some good news and any of them could spur the S&P to those higher highs.

[racqueteer]

uncleharley, do you think that the implosion of early 2020 needs to be accounted for? As an admitted layman, it seems to me that it was fairly exigent and maybe is an iffy data point to be working with. What does TA theory say about such an 'abnormal' occurrence? What about 9/11 as maybe an extreme example of this? I'd be inclined to start looking again around May instead.  Curious...

[uncleharley]

Sure, but you need a longer term chart to do it with such as stockcharts.com/h-sc/ui?s=$SPX&p=W&b=3&g=0&id=p99035663394&a=524485138&listNum=86 As long as the short term trend is above the support of the long term trend we do not have to worry about the march lows of '20.

[FD1000]

Dec 31, 2020 15:54:55 GMT racqueteer said:

I'm just now looking at this, but it's pretty clear that the first chart posted by FD, which covers a longer time period, shows the "magaphone" pattern to which chang refers.  The latter chart, limited to a shorter period of time which FD posted second, shows instead a rising channel.  So which one takes 'control'?  Seems as if one has to know the optimal time period to use in order to select the proper chart, no?

My feeling, in this case, is to ignore the big drop of 2020 as being an anomaly.

I believe traders (or just like to make adjustments) should look at short term T/A which is weeks-months. 
First, we have to remember that stocks usually go up most times.  Second, the Fed have put a huge support for stocks and bonds.
I would not add more to the SP500 now.  The time to add was early Nov 2020(see chart below).
Should I sell? that depends on style and goals.

I don't hold stock long term, I hold bond LT, regardless, I don't sell until I see a decline larger than my max lose, or I switch to another fund with better performance. 
Basically, I don't invest based on prediction, only based on what I see NOW. Another goal is to be invested at all times unless I see very high risk.
This is similar to VIX.  If VIX>30 I start watching carefully...VIX>35 start selling lightly...VIX>40 sell rapidly. I still can make exceptions.  The VIX can spike to 36 and drop the next day.
The key is to find moments that don't often occur and be ready. With that in mind, the OP chart is saying...watch out.  It may be correct shortly (1-4 weeks) or not.  

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