I have a custom moving averages trend indicator that creates a metric based on the relationship between price, 20, 50, 100, and 200 day SMA.
price > 20 > 50 > 100 > 200 then metric = 1.0
price < 20 < 50 < 100 < 200 then metric = 0.0
otherwise, it will be somewhere in between based on their relative postion (above/below).
I color it based on two thresholds (bull=green, bear=red, else blue). Not as important, but the second line is the percentage of the current price relative to the 200 day sma (turns green when it goes below 10%).
So, back to the idea. Right now the indicator is blue and sitting right at 0.35. Looking all the way back to 1996, there were 11 times that the indicator reached that level. In 10 out of the 11 times the S&P continued to fall to 0.24 or lower. That tells me that there is a 10/11 = 90% chance the S&P will continue lower.
How low, that is a guess, but the most likely level will be around 3900. Why, that aligns to the price the S&P jumped out of the green trading channel that it was contained in since 2002. It also aligns well with the red dotted line that provide support in 1996 and resistance in 2003-2006.
At that point I hope we could see a strong rally back up to test ATH, but we could just get a small rally and head on down to the black dotted line that is the center of the channel that connects 1929 and dot com top.
Now there is a 10% chance that we rally from this location. I think that is something to keep track off because right now the price is sitting right on top of the green channel. If it can hold, then this would be a good time to retest ATH. Both times price touched this channel top, we say sharp and dramatic rallies. The next week or so will be critical to determine the direction.
price > 20 > 50 > 100 > 200 then metric = 1.0
price < 20 < 50 < 100 < 200 then metric = 0.0
otherwise, it will be somewhere in between based on their relative postion (above/below).
I color it based on two thresholds (bull=green, bear=red, else blue). Not as important, but the second line is the percentage of the current price relative to the 200 day sma (turns green when it goes below 10%).
So, back to the idea. Right now the indicator is blue and sitting right at 0.35. Looking all the way back to 1996, there were 11 times that the indicator reached that level. In 10 out of the 11 times the S&P continued to fall to 0.24 or lower. That tells me that there is a 10/11 = 90% chance the S&P will continue lower.
How low, that is a guess, but the most likely level will be around 3900. Why, that aligns to the price the S&P jumped out of the green trading channel that it was contained in since 2002. It also aligns well with the red dotted line that provide support in 1996 and resistance in 2003-2006.
At that point I hope we could see a strong rally back up to test ATH, but we could just get a small rally and head on down to the black dotted line that is the center of the channel that connects 1929 and dot com top.
Now there is a 10% chance that we rally from this location. I think that is something to keep track off because right now the price is sitting right on top of the green channel. If it can hold, then this would be a good time to retest ATH. Both times price touched this channel top, we say sharp and dramatic rallies. The next week or so will be critical to determine the direction.
