Guppy Multiple Moving Average indicator - GMMA

Daryl Guppy is an Australian technical analyst who has developed a very useful method of applying multiple moving averages for trend analysis. His website is called Guppytraders.com which is his educational and training site. The GMMA is essentially two bands of moving averages, a fast band and a slow band. When the fast band is above the slow band the trend is up and when the fast band is below the slow band the trend is down. Below you can see a 60 day chart of 4 hour candle periods of the S&P 500.
A close up of the end of the above chart shows that the fast moving average band has moved above the slow moving average band and that price has pulled back to rest on top of the slow band. This is a low risk entry signal to buy into the market. Click on chart to enlarge.

$BPSPX Status Bull Confirmed

The Point and Figure chart of the $BPSPX Bull Confirmed.

Sector Performance

I found a great way to track performance of the sectors which I want to post here. Click on table to enlarge.

You can do this table yourself by inserting the following string into the window called "Summaries" at www.investertech.com , and then clicking on "Performance". After the table comes up, you can click on various table headings for different time frames:

XLY XLP XLE XLF XLV XLI XLB XLK XLU SPY

This shows that year to date (YTD) only the XLB is positive and up less than 1% while all the other sectors are in the red. Technology (XLK) has faired the worst off -14.05% with Utilities (XLU) -6.34% and Energy (XLE) -5.79%.

Relative Strength - two types

There are two types of relative strength I want to discuss here which could be classified objective and subjective. The first type goes along with our Performance Charts below and is a relative strength based on a comparison so it is sometimes called relative strength comparative. This would be a comparison to a market or index. It could also be called an objective relative strength because the strength is measured against some other indicator. For example, a sector can be compared with the broader market of which it is a part, or two sectors can be compared to each other. We have compared the market of 7 different countries by their index below and found the Hang Seng to be doing the best. Likewise with the sectors Energy is doing the best if we look back over the past year.

The other type of relative strength is a subjective type, if I may use that term to distinguish it from the type above. It is know as the Relative Strength Index (RSI) and is a financial technical analysis oscillator. The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. It takes a single parameter, the number of time periods to use in the calculation, which is commonly set to 14. The RSI can be calculated on any stock or index using its recent history alone. No other stock or index is needed for comparison. I will be posting the weekly RSI of the Select SPDR here as well as the broader market.

Another type of Relative Strength is the ranking system used by Investor’s Business Daily. I will discuss that at another time.

Undecided outlook

A late day rally brought the market up to close positive for the day but relatively flat for the week, ending the week up only 3.12 points. The weekly pattern shown in the chart below is undecisive though it appears the market is at the apex. We will just have to wait and see.

Symetrical Triangle Pattern

This chart pattern is a symetrical triangle pattern in which both bulls and bears appear to be losing conviction as the pattern approaches its apex. Everyone's waiting to see what "the other guy" is going to do, and which way the triangle is going to break.

Three-Sector Hypothesis

I like the StockCharts Performance Charts - called PerfCharts. The time period can be adjusted and comparisons can be made. But what I find interesting is that while a performance chart of the S&P 500 shows it is down -6.93% over the past 1 year (253 days using time slide bar below the chart (See here ) the sectors performance chart for the same period shows most of the sectors are up over a comparible period (See here.) How are we to interpret the data? Our economy has shifted from an economy where raw materials and manufacturing were the pricipal drivers of the economy to more of a service driven economy (See Service Sectors) The service side which could be 70+% of our economy is the side that is suffering the most. Financials, which make up a large part of the service side, are down almost 30%! For the economy to turn around this part of the economy needs to do better.

The Three-Sector Hypothesis divides the economy into raw materials (primary), manufacturing (seconday), and services (tertiary) sectors. I like this idea. Select Sector SPDRs are unique ETF's that divide the S&P 500 into 9 sectors. How can we divide these 9 Amex SPDR Indexes into these 3 sectors? Let's look at each.

Raw Materials - This would include the XLB, XLE and XLU. This is by far the strongest sector of the economy.

Manufacturing - This would include the XLI, XLK, and XLY. This group, like the S&P 500 itself, is down for the year.

Services - This would include XLF, XLP, and XLV. This group is by far the weakest sector of the economy.

The Bullish Percent Index - $BPSPX

The Bullish Percent Index (BPI) is a popular market breadth indicator that is calculated by dividing the number of stocks in a given group that are currently trading with Point and Figure buy signals, by the total number of stocks in that group. Bullish Percent levels that are above 70% are considered overbought, whereas levels below 30% are considered oversold. Strong buy signals occur when the Bullish Percent Index falls below 30% and then reverses up by at least 6%. Conversely, promising sell signals occur when it goes above 70%, and then reverses down by at least 6%. For more information see here. I would not take the current signal as a buy signal as it appears to me that the market is in a 4th wave down pattern and has more to go on the down side. Below is a 2 month daily chart of the $BPSPX which shows a low of 13.60 (meaning only 13.6%of the S&P500 stocks had buy signals) on Jan. 22 and bouncing up to 38% by Feb. 1. And while the market did go higher during that period the momentum still appears to me to be to the down side. However, strictly speaking, this is a buy signal!

HAPPY VALENTINE'S DAY

At the beach today thinking of you.

What have we learned?

From the charts posted so far a few important pieces of information become apparent.

First, the S&P500 has slipped below its long term moving average indicating a downturn in the US market.

Second, of the global indexes listed the Hang Seng Index is doing the best. China has been the fastest-growing major nation for the past quarter of a century with an average annual GDP growth rate above 10%. See here

Third, the HOTTEST Sectors are energy followed by materials(commodities).

Putting all this together: Odds are good for energy and materials stocks listed on the Hang Seng Index. Let's look at one: PetroChina CompanyHere we see the price going up as time goes on which is exactly what we want. It makes sense. As of the end of 2007 PetroChina was 5.84% of the Hang Seng Index.

52 week Sector SPDR Performance Comparison

Which Sectors are HOT and which NOT?
The results are in: Energy(XLE)+30.91%, Materials(XLB)+18.18%, Utilities(XLU)+12.97%, Cons.Staples(XLP)+10.94%, Industrials(XLI)+9.67%, HealthCare(XLV)+3.97%, Technology(XLK)+3.55%, Cons.Discr(XLY)-11.45%, Financials(XLF)-19.4%
Click Here

And here is a 22 day(1 month) chart of above.
Jan. 11, 2008 to Feb. 12, 2008 - Percent change(%)
XLY +9.34, XLB +5.5, XLI +4.99, XLF +2.81, XLP +1.0,
XLE -1.55, XLK -2.62, XLU -4.2, XLV -4.45

Seven Global Markets --> Comparison Chart

From Jan. 4, 2007 to Feb. 6, 2008
Hong Kong +17.2%, Australia +5.18%, Canada +3.01%,
Germany +2.59, USA -6.48%, UK -6.55%, France -13.6%
Click Here

Here is 22 day chart of the above showing
the top of these markets in late October

StockCharts S&P500 charts

Here is a StockCharts version of the S&P500. Note the cross of the 50 and 200 moving average - a so called Golden Cross.
And here is another StockCharts S&P500 chart of
weekly market. Click here to enlarge.

Real Estate Market per the IYR

We all know the real estate market has been in decline. But here you have it, the high in real estate was in February 2007 and it broke its long term support (the blue line) in June 2007. This is the Dow Jones US Real Estate Index and a good proxy to the US Real Estate market. This chart is worth watching. Click on chart to enlarge.

Give me a call

Here is my call button. Give me a call. Do this: Click on the button. It should flip over, if not click on it again. On the other side of this CALL ME! button is a place for you to enter your name and phone number. After you enter your phone number a smaller Call Me button will light up. Click this button and your phone will ring and so will mine. If I am home I will answer otherwise leave me a message. Do you want a CALL ME! button also? Let me know and I will hook you up. Lol. Thanks for calling!

More S&P 500 Charts

Martin Pring uses the 12 period Moving Average on the monthly chart for trend determination as show below.

Here I have put a 52 period Moving Average on the weekly chart with a 1.5% MA Envelope which shows the MA Envelope was broke to the downside the last week in December 2007. Click on chart to enlarge.

Here is a closer look at the above chart. Click on chart to enlarge

Following the same theme here is a daily chart with the 365 Moving Average and a 2% Moving Average Envelope.