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- Automated Stock Market Trading System |
Percent Above 200 DMA Analysis
The percent of stocks above their 200 day moving averages is an indicator often quoted by analysts to judge the direction of the market. The following chart shows the percent of stocks within the Russell 2000 that are above their 200 day moving averages over the 10 year period from 1995 through 2004. The purple line is the Russell 2000 index itself and the yellow line is the 50 day moving average of it.
This chart shows that as the percent of stocks above their 200 day moving averages drops to oversold levels (green line), it is a good opportunity to get into the market. Conversely, as the number increases above overbought levels (red line), the market is dangerously high.
The light blue line shows whether you would be in or out of the market if you used the following strategy: Buy if the percent of stocks above their 200 dma crosses above 39% and sell if it crosses below the 68% level or fails to reach it and falls back below the 39% level. The table below lists the return on your investment following that strategy.
transaction date price Gain/loss Cumulative Buy 1 942 12/29/98 410.4 Sell 1 970 02/09/99 403.1 -1.78% -1.78% Buy 2 1014 04/14/99 417.4 Sell 2 1086 07/27/99 446.5 6.97% 5.07% Buy 3 1303 06/05/00 513.3 Sell 3 1340 07/27/00 501.6 -2.28% 2.67% Buy 4 1359 08/23/00 517.9 Sell 4 1378 09/20/00 521.4 0.68% 3.37% Buy 5 1386 10/02/00 511.7 Sell 5 1387 10/03/00 504.7 -1.37% 1.95% Buy 6 1657 11/02/01 433.1 Sell 6 1711 01/23/02 477.4 10.23% 12.38% Buy 7 1923 11/22/02 400 Sell 7 1947 12/30/02 382.2 -4.45% 7.38% Buy 8 1950 01/03/03 390.3 Sell 8 1961 01/21/03 383.2 -1.82% 5.43% Buy 9 2002 03/20/03 370.5 Sell 9 2099 08/07/03 453.8 22.48% 29.13% Buy 10 2102 08/12/03 466.9 Sell 10 2237 02/25/04 579.04 24.02% 60.15% Buy 11 2369 09/02/04 559.78 Sell 11 2456 01/06/05 619.82 10.73% 77.32% 6 winners 5 loosers The MoneyMachine software allows you to calculate the current percentage of stocks above their 200 day moving averages.
Research courtesy of Jeff Bank and Brian Easom
