Warning Sign?

With Monday’s 130-point drop in the Dow Jones Industrial Average, the % of NYSE stocks above their 200-day moving average dropped from to 64% from 80% on April 29 and from readings consistently above 75% this month. Is this a warning sign of a pending market decline?

The last time this happened – NYSE stocks above their 200-day ma dropped from 79% to 59% during the first week of May, 2010 – the market recovered then declined 14% to its June 28 low and “struggled” for two more months until the September 2010 rally began.

Will history repeat? Time will tell.

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Jim Bittman

Mr. Bittman is the author of two books, Options for the Stock Investor, (McGraw-Hill, 1996), and Trading Index Options (McGraw-Hill, 1998). He teaches courses for public and institutional investors, and he has presented several custom courses throughout the U.S., Europe, South America and Southeast Asia. In 1980 Mr. Bittman…