Stocks trading above the 200-day moving average are a great indicator for helping spot broad market underlying strength/weakness. It does lag the market, but is still very powerful. The chart below shows this info and my thinking of what is likely to unfold sooner than later, although price may still rise for several days yet.
I also use a similar chart for timing swing trades and market tops, which are based on stocks trading above the 20-day moving average. This chart is not shown here but is now trading at a level which generally triggers selling/market top.
Stock Market and S&P 500 Trading and Investing Conclusion:
In short, I am still bullish on the market as I focus on trading with the trend. I do not pick market tops and I do not pick market bottoms. Knowing that stocks make their biggest moves at the end of their uptrend and at the end of a down trend, it’s only common sense that risk is extremely high if you are betting against the current trend.
The best thing to do is wait for a technical breakdown and reversal, which puts the odds more in your favor with much less risk and typically a clear line in the sand to exit the position if you are incorrect.
The last major stock market top, which formed in September of last year, had a series of strong news and strong price action persuading the herd to buy stocks. Instead it was the last impulse wave up just before a strong correction took place. That is much like what we see now with the economic news.