Friday, March 14, 2014

A Look at Intermediate-Term Market Strength

Here's a measure that has done a nice job for me of tracking intermediate-term market strength and weakness.  You can see that we topped ahead of price, which is common, and have rolled over.  We have not, however, reached oversold levels, despite yesterday's stiff decline.  Those oversold occasions have marked very good buying opportunities in the past several years.

The intermediate strength measure looks at the number of S&P 500 stocks making fresh 5, 20, and 100-day new highs and lows and takes a moving average of that composite.  The data come from the Index Indicators site.

Like the crossovers, I've tracked these measures for years.  Daily posting of numbers and testing of relationships provides a learning experience that, for me, is far deeper than anything I can get from staring at screens.

Further Reading:  Implicit Learning and Trading Performance