Best of the Week
Most Popular
1.Spain Ignores Scotland Lesson as Catalan Independence Referendum Could Spark Civil War - Nadeem_Walayat
2.Used Car Buying From UK Dealer Top Tips, CarMotion.co.uk Real Customer Experience - N_Walayat
3.Spanish New Civil War Begins as Madrid Regime Storm Troopers Quell Catalan Independence Rebellion - Nadeem_Walayat
4.Virgin Media Broadband Down, Catastrophic UK Wide Failure! - Nadeem_Walayat
5.Are the US Markets setting up for an Early October Surprise? - Chris_Vermeulen
6.The Pension Storm Is Coming To Europe—It May Be The End Of Europe As We Know It -John_Mauldin
7.Stock Market Crash 2018; Will it Prove to be Another Buying Opportunity - Sol_Palha
8.The Profoundly Personal Impact Of The National Debt On Our Retirements - Dan_Amerman
9.Stock Market as Good as it Gets; Like 2000 With a Twist -Gary_Tanashian
10.1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - Nadeem_Walayat
Last 7 days
Bitcoin Hits $6,000, $100 Billion Market Cap As Helicopter Ben and Jamie Demon Warn The End Is Near! - 22nd Oct 17
Time for Caution in Gold Miners - 22nd Oct 17
“Great Rotation” Ahead; Will it Be Inflationary or Deflationary? - 21st Oct 17
The Trigger for Volatility, Rates and the Next Crisis - 21st Oct 17
Perks to Consider an Agent for Auto Insurance - 21st Oct 17
Emerging Megatrends Hurting Consumers - 21st Oct 17
A Catalyst of the Stock Market Bubble Bust - 21st Oct 17
Silver Stocks Comatose - 21st Oct 17
Stock Investors Ignore What May Be The Biggest Policy Error In History - 20th Oct 17
Gold Up 74% Since Last Stock Market Peak 10 Years Ago - 20th Oct 17
Labour Sheffield City Council Employs Army of Spy's to Track Down Tree Campaigners / Felling's Watchers - 20th Oct 17
Stock Market Calm Before The Storm - 20th Oct 17
GOLD Price Creates Bullish Higher Low - 20th Oct 17
Here’s the US’s Biggest Vulnerability in NAFTA Negotiations - 20th Oct 17
The Greatest Investing Lesson Learned from the 1987 Stock Market Crash - 20th Oct 17
Stock Market Time to Go All-in. Short, That Is - 19th Oct 17
How Gold Bullion Protects From Conflict And War - 19th Oct 17
Stock Market Super Cycle Wave C May Have Started - 19th Oct 17
Negative Expectations, Will the Stock Market Correct? - 19th Oct 17
Knowing the Factors Affect your Car Insurance Premium - 19th Oct 17
Getting Your Feet Wet In Crypto Currencies - 19th Oct 17
10 Years Ago Today a Stocks Bear Market Started - 19th Oct 17
1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - 19th Oct 17
Virgin Media Broadband Down, Catastrophic UK Wide Failure! - 19th Oct 17
The Passive Investing Bubble May Trigger A Massive Exodus from Stocks - 18th Oct 17
Gold Is In A Dangerous Spot - 18th Oct 17
History Says Global Debt Levels Will Lead to Another Crisis - 18th Oct 17
Deflation Basics Series: The Quantity Theory of Money - 18th Oct 17
Attractive European Countries for Foreign Investors - 18th Oct 17
Financial Transcription Services – What investors should know about them - 18th Oct 17
Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures - 18th Oct 17
Surge in UK Race Hate Crimes, Micro-Racism, Sheffield, Millhouses Park, Black on Asian - 18th Oct 17
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

The Moving Averages Based Stock Feeder Pond Trading Technical Tool

Commodities / Crude Oil Mar 03, 2009 - 05:06 PM GMT

By: Marty_Chenard

Commodities Best Financial Markets Analysis ArticleA powerful use of the Moving Average concept ... Most investors use Moving Averages on their charts ... like the 20 day, 50 day, 100 day, and 200 day moving average.  As indicators they lag behind movement, which is why many like to use an Exponential Moving Average over a Simple Moving Average.


Many investors like to use Moving Averages as a technical indicator on their charts.  That is one way to use moving averages, but many professionals also like to follow the "percentage of stocks" that are above or below various averages.

Using them as technical indicators is one way to use moving averages, but many professionals also like to follow the "percentage of stocks" that are above or below various averages.

The reason why professionals like to follow Moving Average Stock Percentages ...

Years ago, when I used to fish in New Hampshire, I used to drive by ponds and quickly read whether they were a "feeder pond" or not.   To me, a " feeder pond " was one where I knew that the reproduction rate of the bass and other species was extremely high and fast.   The key to being a feeder pond or not had to do with its vegetation, which was part of the support that I wanted to see in that ecosystem.  Needless to say, it was normal to catch a string of bass at sunset and have a great meal.

If you can understand the concept of a "feeder pond", then you can understand the importance of using the "% of stocks above their Moving Average" for a multiple series of moving averages.  And why that can be an important key to knowing the direction of the markets, and/or finding new stocks that are ready to have a bullish run.

Now think about this process ...

- For a stock to move above its 50 day moving average, it first has to move above its 20 day moving average.

- For a stock to move above its 100 day moving average, it first has to move above its 50 day moving average.

- For a stock to move above its 150 day moving average, it first has to move above its 100 day moving average.

The "feeder pond" concept ...

*** So, stocks above their 20 day moving average is the "feeder pond" for the stocks that WILL gravitate to the point of going above their 50 day moving average .  

*** And the stocks above their 50 day moving average is the "feeder pond" for the stocks that WILL gravitate to the point of going above their 100 day moving average.  I am sure you get the concept, and understand why this is important.

Are the "feeder ponds" breeding new fish or are they dying off? Are the "stock feeder ponds" breeding new rally-stocks, or are they dying off?

Today, we will explore The percentage of stocks that are above a moving average of 20, 50, 100, 150, and 200.  We will also look at how those percentage numbers changed over a 1, 2, 5, and 30 day period of time (in the chart below: TD is today, TD minus one is yesterday, TD minus 5 is last week, and TD minus 30 is last month.)

Feeder pond observations:
First, look at the maximum heights of each moving average category in the chart below.   Looking at them, you can notice that the 50 Day Moving Average category had the highest percentage 30 days ago. That said that the feeder pond for the 100 day moving average looked hopeful as there were a lot of stocks in the pool. However , to keep that expanding and rallying, the 20 day Moving Average percentage for 30 days ago would have had to be at a higher percentage to keep an expanding feed going on.  It didn't have a higher percentage, instead ... the percentage was 20% lower.   That gave you the knowledge that the whole feeder process could be in trouble.

Now ... look at what happened in the last 5 days.  The percentage of stocks in the 20 day feeder pond fell in half ... that meant that the 50 day pond will have its current supply of NEW stocks die off.   When you look at the 50 day feeder pond, you can see that the EXISTING supply of stocks died off and fell dramatically. 

Now, if you look at the green bars, you can see that last Friday's 20 day moving average "feeder pond" was LOWER than the 50 day moving average "feeder pond".   That means there will be an expected decline in the number of stocks above their 50 day moving average in the next few days.  And if the number of stocks above a 50 day moving average decline, then the stock market will decline.  

Look at it this way ... expanding "stock feeder ponds" produce higher points on the DOW and other indexes.  Contracting "stock feeder ponds" produce lower points on the DOW and other indexes.

Is there a reason for presenting today's information?   Yes, it is to get each of you thinking outside of the box ... to expand how you think about the stock market so that you can all be better investors as you approach your retirement years.  

             ________________________________________________

*** Feel free to share this page with others by using the "Send this Page to a Friend" link below.

Send This Page To a Friend

By Marty Chenard
http://www.stocktiming.com/

Please Note: We do not issue Buy or Sell timing recommendations on these Free daily update pages . I hope you understand, that in fairness, our Buy/Sell recommendations and advanced market Models are only available to our paid subscribers on a password required basis. Membership information

Marty Chenard is the Author and Teacher of two Seminar Courses on "Advanced Technical Analysis Investing", Mr. Chenard has been investing for over 30 years. In 2001 when the NASDAQ dropped 24.5%, his personal investment performance for the year was a gain of 57.428%. He is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools.  As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL.  He is an advanced technical analyst and not an investment advisor, nor a securities broker.

Marty Chenard Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife