Bear Is In Charge

The $OEXA200R (the percentage of S&P 100 stocks above their 200 DMA) is a technical indicator available on StockCharts.com that can be used to forecast conservative entry and exit points for the stock market.

The OEXA is used to find the "sweet spot" time period in the market when you have the best chance of making money. See Is This the Best Stock Market Indicator Ever? for a discussion of this technical tool.

The charts below are current through Friday's close.

Daily OEXA200R past 12 months

Monthly OEXA200R since April 2007

Interpretation:

The OEXA200R closed out the week at 55%.

Of the three secondary indicators:

• MACD has crossed and is NEGATIVE (red line above black).
• Slow STO has flipped from positive to NEGATIVE.
• RSI is below 50 and is NEGATIVE.

Commentary

Well, hang on. Here we go.

On May 15, the OEXA200R closed out the day at the critical 65% level, the point at which it is advisable to sell all long positions in anticipation of a major market decline. Since mid-2007, the starting point of the Great Recession, the OEXA200R has dropped to the 65% line on 25 July 2007, 16 October 2007, 6 May 2010 and 15 June 2011. In hindsight, each of these dates turned out to be auspiciously timed exit points preceding major downturns. See the "Background" section below for a fuller explanation of the significance of this metric.

The final phase of the mathematically inevitable Euro zone asphyxiation and disintegration is under way. Operation Twist is scheduled to conclude at the end of June. An Israeli – Iran conflict and oil spike are likely to follow before autumn. Taken together, the three are going to produce some very nasty and unpredictable synergy. The "Perfect Storm of 2012" has begun.

What is particularly disturbing is the velocity with which OEXA200R has crashed - from 89% to 55% since May 1. At this point, all bets are off. There may be a small rebound in the next month but even so, that would just be a "bear trap" for incautious traders. More likely, the Euro implosion will quash even that brief flicker of hope. Think about this: In the coming mid-June Greek elections, the betting now is that the far Leftists and Communists will come in first and likely even gain a majority. How's that going to affect investor confidence? It's just one indication of how insane the European situation has gone. For all of the above reasons, the most prudent course right now is to just sit on your cash, watch and wait. . . .

http://advisorperspectives.com/dshort/guest/John-Carlucci-Best-Indicator-Ever-Update.php