Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

SP500 Price Extensions from 200 Day SMA Insights

Fri, Feb 11, 12:19 PM ET, by Corey Rosenbloom

What does it mean when someone says “The SP500 is really, really overbought?”

There’s many ways to measure “really, really overbought” objectively, and one of those is to compare the percentage price is extended from a certain moving average, for example the 200 day simple moving average.

Right now, price is just over 14% extended above its rising 200 day SMA, but what does that mean? Is that a lot?

The answer is yes, but let’s put that in context of the entire bear market and recent bull recovery to see past “overextensions” from the 200 day SMA.

Here’s the chart:

You may need to click to enlarge the chart (via Flickr).

By doing objective indicator analysis like this, we can easily quantify the current “overextension” relative to past “overextensions.”

Given the recent two-year history in a broader light like this, 14% is up there, but certainly NOT “really, really” up there by any means.

For example, the bullish percentage peak came in October 2009 when price moved 20% up above the 200 day SMA.

Notice that the indicator was just starting to turn up after price crossed this very important average initially (a very simple potential long-term buy signal) in June 2009.

Since then, price hasn’t been able to meet that percentage of ‘overextension’ because the average comfortably rose along with price.

This is why you tend to get big overextensions early in a price move and not towards the end… in fact, toward the end, this indicator will show divergences like many others (as was the case when the market peaked in October 2007).

Also, the current 14% extension is just over 1% greater than what we saw at the prior 2010 April peak (ahead of the mean Flash Crash).

Now let’s look at the underside from the bear market.

The “worse” it got was a 40% under-extension beneath the 200 day SMA at the heart of the financial crisis in November 2008.

The 40% number was followed shortly with a new index price low with a ‘divergent’ indicator reading at 38% under-extension when the market bottomed in March 2009.

So the quick conclusion is – always take indicator values and current situations in context of the broader picture/history.

An overextension 14% above the rising 200 day simple moving average is undoubtedly “a lot” – but it’s not the most price has ever been extended in recent history – neither from the bull or bear market in the last few years.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Order your copy of The Complete Trading Course (Wiley Finance) now available.

blog.afraidtotrade.com


SDI Glossary: "price" Definition
SDI Glossary: "Finance" Definition
SDI Glossary: "TA" Definition
This Article's Word Cloud:   Corey   October   above   afraidtotrade   always   average   bear   been   broader   bull   chart   compare   conclusion   context   current   does   example   extended   extension   from   history   indicator   just   like   many   market   mean   moving   over   overbought   overextension   overextensions   past   peak   percentage   price   really   recent   relative   rising   rose   simple   that   there   this   under   very   what   when   with

| More

Big Bullish Breakout Market Update and Trending Stock Scan
Mon, Mar 30, 2:31 PM ET, by Corey Rosenbloom

If Friday’s triangle range day session (see update) was boring, today’s expected breakout is thrilling ...

Wake Me Up When The Range Day Ends Market Update and Stock Scan March 27
Fri, Mar 27, 3:11 PM ET, by Corey Rosenbloom

Wait – was the market open today? So far nothing’s happened. I’m kidding but that’s ...

VSpike Reversal Intraday Market Update and Focused Stock Scan
Thu, Mar 26, 1:51 PM ET, by Corey Rosenbloom

The selling pressure continued today yet a strong V-Spike Reversal off the 2,050 level may ...

Biogen BIIB Shoots the Moon then Falls to Key Support Pivot
Thu, Mar 26, 1:21 PM ET, by Corey Rosenbloom

We saw an interesting price pattern in high-flying Biogen (BIIB) only to see a harsh ...

Selloff Market Update and Trending Stock Scan March 25
Wed, Mar 25, 2:31 PM ET, by Corey Rosenbloom

We have a second sell-session in a row as the S&P 500 moves down from ...

Repeat Bullish Pattern in Twitter TWTR Calls for New Highs
Tue, Mar 24, 11:21 AM ET, by Corey Rosenbloom

Twitter (TWTR) is back in the news with a bullish breakout and a strong recent ...

March 24 International ETF Color Grid Shows Two Strong Countries
Tue, Mar 24, 11:11 AM ET, by Corey Rosenbloom

Which two country ETFs are breaking out to new highs in a continuing uptrend? And ...

Join Me Live for Monday Morning Market Panel Update
Sun, Mar 22, 9:41 PM ET, by Corey Rosenbloom

Join me live Monday Morning for real-time market commentary and strategy planning for the week ...

March 19 Retracement Market Update and Big Stock Scan
Thu, Mar 19, 2:11 PM ET, by Corey Rosenbloom

After the Federal Reserve dropped the “patient” language but reminded us that recent economic conditions ...

Post Fed Money Flow and Dollar Flash Crash Update
Thu, Mar 19, 1:51 PM ET, by Corey Rosenbloom

Markets today retraced part of the sudden movement following yesterday’s Federal Reserve announcement. Let’s take ...

GoPro GPRO Reveals How to Trade Triangle Breakouts
Wed, Mar 18, 3:31 PM ET, by Corey Rosenbloom

One of my favorite breakout trading patterns is the Triangle, and GoPro (GPRO) just gave ...

March 17 Quick Color Sector Strength Grid
Tue, Mar 17, 11:11 AM ET, by Corey Rosenbloom

With the market near all-time highs again, which sectors are the strongest and which are ...

Big Rally Market Update and Trending Stock Scan March 16
Mon, Mar 16, 1:51 PM ET, by Corey Rosenbloom

Counting today, the last four trading sessions have reversed off clear divergences, and today’s session ...

Stocks Falling Market Update and Trending Stock Scan March 13
Fri, Mar 13, 1:51 PM ET, by Corey Rosenbloom

Divergences can be extremely important in planning and trading intraday market reversals. Momentum and – ...

March 12 Big Bull Market Update and Trending Stock Scan
Thu, Mar 12, 2:31 PM ET, by Corey Rosenbloom

As was suggested in yesterday’s post, stocks stabilized off support with positive divergences and today ...

A Quick Update of Cross Market Money Flow Grid March 11
Wed, Mar 11, 4:11 PM ET, by Corey Rosenbloom

There have been some big moves in the Cross-Market (Intermarket) Money Flow landscape recently. Let’s ...

March 11 Support and Market Update with New Stock Scan
Wed, Mar 11, 3:41 PM ET, by Corey Rosenbloom

Today’s session continued the selling pressure of yesterday, but the bears were less relentless. Buyers ...

March 10 Selloff Update and Trending Stock Scan
Tue, Mar 10, 3:11 PM ET, by Corey Rosenbloom

The selling pressure continued today on the support breakdown under 2,070’s pivot. What resulted – ...

Five Strong Stocks Holding Up Surprisingly Well During the Pullback
Tue, Mar 10, 10:21 AM ET, by Corey Rosenbloom

During market pullbacks, it’s often helpful to step inside the market to see which stocks ...

Returning to a World Where Breadth Divergences Matter
Fri, Mar 6, 12:51 PM ET, by Corey Rosenbloom

It’s easy to get caught up in thinking “The market will go up forever!” when ...

Apple AAPL at Key Trading Pivot Level on Dow Jones News
Fri, Mar 6, 11:51 AM ET, by Corey Rosenbloom

Is Apple (AAPL) a buy right here at a key inflection level as news broke ...

Big Morning Moves for Stocks Gold Treasuries and Dollar
Fri, Mar 6, 11:31 AM ET, by Corey Rosenbloom

Luckily, Friday’s session is exciting – certainly not boring at all! Let’s quickly chart four ...

March 5 Stock Stab Scan and Market Update
Thu, Mar 5, 3:21 PM ET, by Corey Rosenbloom

Stocks stabbed at the lows with more sharp rallies today, as we’ve seen over the ...

March 4 Repeat Day Market Update and Stock Scan
Wed, Mar 4, 2:11 PM ET, by Corey Rosenbloom

Today’s session is playing out identically to yesterday’s session, with the early down-move and the ...

Bull Trap and Target Level Update for Copper JJC
Tue, Mar 3, 12:11 PM ET, by Corey Rosenbloom

What looked like a possible bullish breakout devolved today into a trap as Copper buyers ...

March 2 Reversal Market Update and Trending Stock Scan
Mon, Mar 2, 1:31 PM ET, by Corey Rosenbloom

After forming a base support level, stocks rallied sharply this morning and continued a short-term ...

Yes Stocks can Still Fall Market Update and Trending Stock Scan Feb 27
Fri, Feb 27, 2:11 PM ET, by Corey Rosenbloom

Strangely, stock prices can actually fall and today’s session so far is a very similar ...

Three Strong Country ETFs Joining the US at New Highs
Fri, Feb 27, 1:11 PM ET, by Corey Rosenbloom

As we chart the US S&P 500 (and related ETFs) flirting with more all-time highs, ...

Feb 26 Market Can Actually Fall Update and Stock Scan
Thu, Feb 26, 2:41 PM ET, by Corey Rosenbloom

Can you believe the market can actually fall? I didn’t either! Nevertheless, today’s session is ...

Feb 25 Continuation Market Update and Stock Scan
Wed, Feb 25, 1:11 PM ET, by Corey Rosenbloom

So far, today’s session followed the “opening gap weakness, intervention bullish strength rally later” pattern. ...

John Carter Webinar Tonight! How to Generate Consistent Trading Results
Tue, Feb 24, 1:51 PM ET, by Corey Rosenbloom

I wanted to invite you to a free educational webinar from long-time trader (and clear ...

Feb 24 New Highs Market Update and Stock Scan
Tue, Feb 24, 1:41 PM ET, by Corey Rosenbloom

After the recent sideways consolidation, stocks continued their short-squeeze driven rally and “All Clear” breakout ...

9 Stocks Breaking Strongly to New 52 Week Highs Today
Tue, Feb 24, 11:51 AM ET, by Corey Rosenbloom

As the S&P 500 extends its breakout to new highs – along with the powerful ...

Buying Apple AAPL on Breakouts to New Highs
Mon, Feb 23, 2:51 PM ET, by Corey Rosenbloom

Apple (AAPL) shares broke strongly to new all-time highs today, leaving some traders thrilled and ...

Feb 23 Flat Market Update and New Stock Scan
Mon, Feb 23, 1:51 PM ET, by Corey Rosenbloom

After a powerful short-squeezed breakout to new all-time highs, stocks traded flat to start the ...

John Carter on Simple Strategies for Consistent Account Growth
Sat, Feb 21, 8:11 AM ET, by Corey Rosenbloom

Have you seen John Carter’s newest educational video? Entitled “Why I Trade Options for Consistent ...

Feb 20 Midday Market Update and Stock Scan
Fri, Feb 20, 2:11 PM ET, by Corey Rosenbloom

Today saw a repeat event where the morning started with a quick sell-off yet buyers ...

Feb 19 Weak High Market Update and Daily Stock Scan
Thu, Feb 19, 1:21 PM ET, by Corey Rosenbloom

Surprisingly, the weak new price highs continued with another stab at the upper level again ...

Feb 18 Reversal Market Update and Trending Stock Scan
Wed, Feb 18, 1:11 PM ET, by Corey Rosenbloom

Over the last couple of sessions, as I highlighted to members last night, stocks continued ...

Six Power Trending Stocks to Start the Week
Tue, Feb 17, 12:51 PM ET, by Corey Rosenbloom

As we begin this holiday week fresh from our vacation, let’s highlight six “Power Trending” ...

Feb 13 Bullish Breakout and Trending Stock Scan
Fri, Feb 13, 1:21 PM ET, by Corey Rosenbloom

As logically expected and as I highlighted to members last night, stocks continued their short-squeeze ...

Updating Amazon as it Breaks Higher and Higher
Fri, Feb 13, 12:11 PM ET, by Corey Rosenbloom

Amazon (AMZN) continued its upward pathway following the recent trend reversal and breakway gap. Let’s ...

Feb 12 Breakout and Short Squeeze Update with Power Stock Scan
Thu, Feb 12, 2:11 PM ET, by Corey Rosenbloom

The Short-Squeeze Breakout game-plan triggered this morning and the expected breakout impulse thrust price toward ...

Feb 11 Range Reversal Market Update and Stock Scan
Wed, Feb 11, 3:41 PM ET, by Corey Rosenbloom

Markets STILL are never boring! Today’s action again reminds us of that fact. A rangebound ...

Trading Crude Oil with Divergences into Key Levels
Tue, Feb 10, 11:41 AM ET, by Corey Rosenbloom

How can momentum divergences help your trading style? Simple – by providing early warning signals ...

SP500 Still Playing the Range Ping Pong Game
Tue, Feb 10, 11:11 AM ET, by Corey Rosenbloom

We’re still waiting on your breakout, Mr. Market. ...

Feb 6 Reversal Market Update and Bull Bear Stock Scan
Fri, Feb 6, 1:41 PM ET, by Corey Rosenbloom

Markets are never boring! That’s for sure. What started as a strong, bullish session has ...

Eight Stock Stocks Gapping and Trending Higher Feb 6
Fri, Feb 6, 12:31 PM ET, by Corey Rosenbloom

Intraday traders often scan for stocks that are strong and likely to get stronger so ...

February Market Structure and Trend Reference Charts for Gold Oil Stocks Dollar
Wed, Feb 4, 3:11 PM ET, by Corey Rosenbloom

Let’s step outside the noise and view a broader picture of the reference charts for ...

Feb 4 Trending Stock Scan and Market Update
Wed, Feb 4, 2:21 PM ET, by Corey Rosenbloom

Buyers extended their dominance today, though they’re meeting resistance with divergences, suggesting their bullish swing ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

SP500 Price Extensions from 200 Day SMA Insights | Self Directed Investor | Copyright © 2008 - 2015, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.