Color Charting the SP500 Trend Structure with 100 week Moving Average

Jan 9, 2014: 6:50 PM CST

Did you know that the price distance above the 100 week Simple Moving Average (SMA) for the S&P 500 just reached the highest value (most overextended) of all time, exceeding the stellar peak during the Tech Bubble Boom?

Indeed – it’s true.  Let’s take a look at a Color Chart of the recent S&P 500 action and compare today’s overextended action with that of the Tech Bubble period of 2000.

S&P 500 SPX S&P500 100 week Moving Average Trend Structure Bull and Bear Market Stock market Trading tactics investment

We see the pure price of the S&P 500 overlaid with a 100 week Simple Moving Average (SMA).  I color-coded the periods above the weekly average as Green and beneath the average as Red.

We can also use moving averages – and whether price is above, beneath, or crossing through them, to define a trend in simplest terms (bull = above; bear = beneath).

Using that simple definition, we see the initial Bull Market of the Technology Bubble/Boom and the shift to the Technology Bubble Burst (and recession), to the recover that ended with the 2007 peak, the Financial Crisis Bear Market, and the liquidity/stimulus-fueled recovery that takes us through our current Bull Market.

The indicator beneath price is simply the difference between price and the 100 week SMA.  Higher values means price is “extended above” the average; lower values mean the average is extended beneath it.

While we saw the lowest low of all time in the indicator (in pure index terms – not percentage terms) during the early 2009 bottom.  We just saw the highest value recorded with the indicator at 320, which means the S&P 500 is 320 points above the current 100 day SMA (near 1,531).

The indicator peaked during 1999 at 298.  For reference, the 2007 Bull Market indicator peak was 215.

The chart above simply compares trend structure in a color-coded format relative to the 100 week SMA.  It doesn’t imply that a top has been formed – only that the S&P 500 recently became “more overextended” than what was seen during the strength (and irrationality) of the late 1990’s Tech Bubble mania phase which is quite interesting.

While we’re not seeing similar 1999 bullish mania in 2014, we are seeing the economy recover objectively while large-scale stimulus – QE3 – continues to be provided by the Federal Reserve.

It opens the debate as to how necessary stimulus is when the stock market is showing such strong metrics/returns, but that indeed is a discussion for another time and place.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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7 Comments

7 Responses to “Color Charting the SP500 Trend Structure with 100 week Moving Average”

  1. colodude Says:

    Corey, a normalized graph for percentage over/under tells us…….BTW, the color graph is a nice perspective. Boy, s the 100-week MA (simple?) a good tell for the market long term perspective or what?

  2. Longterm Color Charting the SP500 and 100 week Moving Average Percentage | Afraid to Trade.com Blog Says:

    […] week Moving Average Percentage Jan 10, 2014: 1:45 PM CST In a follow-up to yesterday’s “Color-Charting the S&P 500 Trend Structure with 100 week Moving Average,” I received a few suggestions to normalize the chart using percentage terms – and […]

  3. guest1 Says:

    good chart corey- i'd love to see you compare vs the start of the bull run from the start of the 1980's for how long it can stay above the 100d and how divergent it was

  4. Longterm Color Charting the SP500 and 100 week Moving Average Percentage | Matt Watterson Says:

    […] Stocks Trade on January 10, 2014 by ArleenWdne. In a follow-up to yesterday’s “Color-Charting the S&P 500 Trend Structure with 100 week Moving Average,” I received a few suggestions to normalize the chart using percentage terms – and […]

  5. Longterm Color Charting The S&P 500 and 100 Week Moving Average Percentage - Investing Video & Audio Jay Taylor Media Says:

    […] Rosenbloom: In a follow-up to yesterday’s “Color-Charting the S&P 500 Trend Structure with 100 week Moving Average,” I received a few suggestions to normalize the chart using percentage terms – and that’s an […]

  6. dchrist81 Says:

    The scary thing is that there is no bearish divergence between price and the indicator. So as absurd as price has become, we will (eventually) fall from even higher prices.

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