[isatrader]

Hi Isatrader, something that I have been wondering about the 150 day MA. I believe Stan Weinstein said something like the 150 day MA is about 75 to 80% in step with his stage analysis. If that is the case, is it possible that the 150 day MA is 25 to 30% higher when the stock market hits a stage 3 top. A stock can be over it's 150 day MA and have a flat 150 day MA. Weinstein's stage analysis would put a stock with a flat 150 day MA in stage 3. Stan Weinstein's stage analysis judges stocks healthy that are in a stage 1 and 2 only. That would put a total different spin on 150 day MA when the market is topping out.

Just a thought .

Yes, that's right, Weinstein's Proprietary Stages Survey only shows stocks in Stages 1 & 2, and is why the Percentage of Stocks above their 150 day MA (30 Week MA) is only considered to be 75 to 80% accurate in matching it. As stocks in Stage 3 fluctuate above and below their 150 day MA, and hence when they are above it, the Percentage of Stocks above their 150 day MA figure would be stronger than Weinstein's Stages Survey would be. However, as you know, the point of the "Weight of Evidence" approach is not to use one single market breadth indicator in isolation, and so while the Percentage of Stocks above their 150 day MA might be one of the key market breadth measures in our toolbox, it is only one of many when determining the strength of the market. As the other breadth measures also have an equal vote in the "Weight of Evidence" approach and give you clues as to what is going on. So for example, the Bullish Percent Index, the Advance Decline Line, the New Highs - News Lows, the P&F breakouts - breakdowns, the sector breadth etc. For example your point about the Percentage of Stocks above their 150 day MA not showing all the stocks in Stage 3, as some will be above their 150 day MA still. The New Highs - New Lows can be very helpful with this difference, as a stock above it's 150 day MA, but still in Stage 3 would not be making new 52 week highs, and so you'd see a weakening in the New Highs - News Lows, as well as the other breadth measures also.

The US market is certainly in Stage 3 currently, but which way it resolves is not a definite outcome, as Stage 3 doesn't automatically mean the next Stage will be a Stage 4 breakdown, as often it is just a long period of consolidation and rotation within the market that then resolves in a Stage 2 continuation. So which way we go currently is uncertain, as the market breadth Weight of Evidence is in a fairly neutral position overall. So I will continue to look for improvement or deterioration to give further clues as to which way we will go.