a simple chart to tell you whats going on in the "market", and etf or a stock

JHuber8383

I don't know how to attach a picture of this chart so I have to describe it in words. In reading some of the recent discussions in the blogs on stockcharts I find a lot of confusion and conflict on where the "market" is currently. The chart is called the 50 day ema chart of $SPX with a 3 yr time span, price opacity is set to 0, and Force 13 is placed behind price. Nothing else is on the chart. Create this chart on your computer and you will see that $SPX is in an uptrend until July 2015 when it peaks. A "correction" then occurs ending in a trough. The trough is then followed by the formation of a lower peak and a lower trough which signifies a "trend change". $SPX is now in a downtrend. This is followed by a "counter trend rally". So the current state of the "market" or $SPX is a downtrend with a counter trend rally. If you substitute $ NYA(NYSE composite index) for $SPX you see the same thing.
The 50 day ema chart with 3 yr time span clearly tells you the trend, identifies any correction and any counter trend rallies. Theres been talk about a "new bull market" etc. This is nonsense. We are in a downtrend with a counter trend rally. The 50 day ema would have to exceed the peak of the 50 day ema in Dec. 2015 and then form a higher trough for a trend change to occur.
I would appreciate any comments and thoughts on the value of this type chart for simply identifying whats going on in the "market" or in a trade.

markd

Well, are there bull markets that begin without a counter trend rally?

I think the arguments for a new bull market are based on some market internals that are thought to be not typical of a bear market - some I think I've seen cited are advances vs. declines, number stocks above their 200 day, a high value for the bullish per cent index, etc. If you use trend lines on some indicators, like OBV, you can make a case that the down trends in those indicators have been broken (as always, depending on how you draw them).

Sometimes depending on just one indicator like the 50 day to confirm a new bull market keeps you out of the market for quite a large part of the bull move. If you extend your chart back to 2008, I think you would see that you could not get in until about January 2011, or about 400 points late. Other times it does work just fine - like the 2003 bottom. It all depends on the character of the price action at the turning points. So some people like to look for other evidence.

According to Dow theory, you are right, a bull market has not been confirmed, and won't be for quite some time. Obviously, some people don't want to wait, so they look for confirmation of their bullish bias elsewhere. I guess that's why they call it speculation.

karenbcz

How do I get a 3- year chart?

markd

If you are not in Chart Workbench, click on any chart to get you there.

Under the chart, find the "Chart Attributes" section.

In "Chart Attributes", find the "Period" heading, select Daily (or another timeframe larger than daily) from the drop down, then under "Range", open the drop down and select "3 years".

Is that what you are asking?

To get the 50 ema @JHuber8383 mentions, look under the drop downs in the "Overlay" section (next section on Chart Workbench under the Chart Attributes section).

If you want to save the style, click "Add New" in the "Chart Styles" line right above the Chart Attributes section, and give it a name.