As long as I’m in a bah humbug mood, I thought I’d turn my cold eye on a fellow blogger, rather than on the MSM.
There is a fellow who posts on Doug Short’s site named John Carlucci. He is the author of a Kindle book titled Ashes To Riches: How To Profit Spectacularly During The Economic Collapse of 2012 to 2022.
Well, he’s entitled to his nuanced views of the future. As regular readers know, I am much more riven with uncertainty. As the old Traffic song goes, who knows what tomorrow may bring?
In any case, Mr. Carlucci has the similarly nuanced technical tool titled Best Stock Market Indicator Ever. The latest update reports (LINK):
Best Stock Market Indicator Ever:
Rises to 88% and Secondaries Confirm “Tradable”
Here is the longer-term chart he uses to support this view. The large graph shows the percentage of S&P 100 (not the 500) stocks trading above their 200 day moving averages (“DMA”). Whether he uses exponential or simple moving averages is not specified in this post, unless I missed something. In any case, it is a trend-following system, for which he uses certain technical tools for support. Here is the decade-long graph:
Mr. Carlucci hedges and states: While not intended as a day trading tool per se it can certainly be used as background information by day or highly speculative traders.
This leaves one unclear. It’s the best stock market indicator ever, right? But all it can do is not allow one to day trade, but it “can be used as background info for speculators”.
Basically, my interpretation of this indicator is that it adds nothing. If you go back to the 2002-3 period, and again to 2009, everyone could see the obvious: a long bear market had exploded with force into a bull market, in the setting of dramatic Federal Reserve easing. There are a hundred graphical ways to show this, but anyone who has any business trading needs none of them, just either an eye or an ear.
To the extent the above data mean anything, they may suggest the opposite of his conclusion that we have a tradable opportunity from the long side. In 2002, and again in late 2008 and early 2009, extreme negative breadth was seen, with readings under 20%. Then there was the surge. By 2006 moving into 2007, buyers pushed most stocks up for about a year, non-stop. Then the bear market began. We are now also four years since those extreme negative readings. The first pop to a bullish extreme following the bearish extreme was, as it was in 2003, a forerunner to a multi-year bull market. As was the case in 2006-7, a major stock market move occurred without new bullish fundamentals. That was the topping process before a major bear market.
The bottom line is that so far as the general public goes, the Fates do not let one simply look at prior patterns and have any confidence of what will happen tomorrow, and tomorrow, and tomorrow.
Anyone who really has the best stock market indicator ever isn’t sharing it with us for free.