We may have just received a significant bullish buy signal for US equities. I have been tracking the percentage of stocks on the NYSE trading above their 200 Day Moving Average. On top of this percentage I have overlaid a 50 Day Moving Average.
Thursday the NYSE percentage of 20.56 closed above the 50 DMA for the first time since July 7. The percentage number has remained below this 50 DMA since July 22, which coincides with the beginning of the end for the summer rally - the S&P500 dropped 226 points or 20% from July 22 to August 8.
This technical set-up has been a rather reliable indicator of bullish breakouts over the last three years.
On March 13, 2009, the percentage number closed above the 50 DMA, and the S&P500 rallied from 756 on July 13, 2009 to a rally peak 1,212 on April 26, 2010 - a gain of 60%.
On September 1, 2010, the percentage number closed above the 50 DMA and the S&P500 rallied from 1,080 on September 1, 2010 to a rally peak of 1,361 on May 2, 2011 - a gain of 26%.
It may be time to drown out the doom-and-gloom headlines and go long US equities.
Click to enlarge
Disclosure: I am long SPY.