Timing the Market with % Above MA Ratios

Published April 19th, 2006 in Technical Analysis Tags: No Tags.

One of the most simple measures of market internals is the percentage of stocks above their moving average. Any moving average can be used, although the most common are the 50 and 150 simple daily.

This is a useful metric because as stocks move above and below their moving averages, they get stretched away from the average basis that traders or investors entered at. By looking at this you get an idea of how ‘healthy’ a market.

But it can also shows you important inflection points in the market. For example, when almost all stocks in a market are below their 50 day moving average, you can bet that a snap back rally is not too far away.

Some time ago, I was experimenting with this and I stumbled on a new way of looking at this metric. I haven’t found anyone else using the % above MA in this way. But then again, its quite possible that another chart junkie, hidden away somewhere, had already discovered this.

So what is it? Well, instead of simply looking at the percentage of stocks above a moving average, I look at a ratio of two.

One short term (50 day MA) and the other long term (200 day MA). And I divide the former by the latter. Here’s what it looks like for the S&P 100:

I think the chart speaks for itself. In case it doesn’t, or its all gibberish, stay tuned and shortly I’ll go into some detail about how I use it.

In the meantime, if you’re going to head over to StockCharts.com to experiment with all the % above MA stuff they have, remember to add ‘R’ at the end of the code/symbol. Otherwise you’re not looking at a percentage measure.

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18 Responses to “Timing the Market with % Above MA Ratios”

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1 cclee Jun 9th, 2008 at 10:15 pm

Hi Babak,
Love your blog and have been catching up with old entries.

I’m subscribed to Stockcharts.com’s Extra features.
Where can I find the “% above MA” and “create your own Bullish %” stuff that you described? I can’t seem to find it.

Thanks for your time, and thanks again for the great blog!
2 Babak Jun 9th, 2008 at 10:24 pm

cclee,
try searching for “a50r” and as for building your own BP index.
hope that helps!
cheers
3 cclee Jun 9th, 2008 at 10:31 pm

Hi there,
Thanks for the quick reply.

Found the BPI stuff. The link is here for more details on StockCharts

(In case other people follow this thread in the future)

However, I did a search for “a50r” as you suggested but found nothing. Any ideas?

Thanks again for your help!
4 Babak Jun 9th, 2008 at 10:41 pm

here is the search result for “a50r” - you can also try a150r and a200r - the “r” keeps it relative so you iron out historical changes and can compare going back in time.
5 cclee Jun 9th, 2008 at 10:43 pm

Ah! I was searching for “a50r” on your site.
Thanks again.
6 jiminfwa Aug 15th, 2008 at 2:11 pm

I use Amibroker and I use the 10,33, and 89 MA for BP%. It gives perfect hindsight visually …still working on the hard right edge. It seemed like a good idea from point and figure charts so i adapted it for USA stocks. I like the view it provides in my weekly analysis and gives me a feel for the sentiment.
7 JetJockChicago Jul 14th, 2009 at 1:17 am

I found this Timing the Market with % Above MA Ratios article very interesting (Apr 2006) and was wondering if you’d be kind enough to explain exactly how you construct the ratio in order to form the charts in StockCharts? In this example, you use the S&P 100 (OEX) with the ratio using 50MA & 200MA. Perhaps you could explain step-by-step from calculating the ratio to generating the OEX MA ratio charts. I’d be very grateful if you could provide a detailed example so readers of your blog can learn to do it for themselves.

Many thanks for all your great posts - very thought provoking, as well as original!

Best Regards,

D. Shute
LtCdr USN(Ret)
8 Babak Jul 14th, 2009 at 2:32 pm

JetJock,
the symbols for the OEX breadth on stockcharts.com are $OEXA50R and $OEXA200R. You can create a ratio by putting a colon between them, like this: $OEXA50R:$OEXA200R
There are other indexes and you can find their symbols by doing a symbol search for “A50R” - that should bring up most of them.