There was a big squeeze in stocks Wednesday that was triggered by an even bigger squeeze in oil as the prop the market coalition seems to have abandoned their effort to decouple stocks from oil after some days without success and instead built a fire under oil futures knowing that just as soon as they moved a minimum amount up that it would trigger a storm of buying by the algos that now run the market and are tuned tightly to every tick up or down of oil. This sudden intraday move up in the stock market may make some people wonder if a new wave higher is beginning but it is only a new wave higher if starts either from the 40, 20, or 10 level of this key market navigation chart. In my article a couple of days ago I showed how it was at 92.20 and today it is at 91.80, still tight against the ceiling and nearly 20 points above the red danger line which is at the 73 level.
If you study the chart for the entire year of 2014 you can see that every time the percent above 50 day MA got up to the red line the market started a leg down. However, just as important notice that the reversals back up happened when the S&P percent above 50 got down to the 40 level, the most bullish level for the market to turn back up. A couple of times it had to go deeper, for instance in early October 2014 when the market went on down to the 20 level before it could start a new leg up. In uptrending markets as in 2014, the 40 level is pretty safe to buy in at and it has worked well. In downtrending markets such as 2015, the level for which the market can start a new leg up is either the 20 or 10 level. Notice that last summer it pegged the 10 level before a new leg up began and just three months ago in January it pegged the 10 level once again. In downtrending markets the 20 and 10 levels are key but with the prop the market coalition manipulating the market on a daily basis it is pretty likely that the 40 level will become the effective turnaround point even though the market is downtrending. So, 40 is the number to look for a sustainable up leg in the market.
Now look at the upper chart where we are still way above the red danger line. It is almost comical that oil is being used to try to start an up wave when the S&P is already tight against the ceiling. The percentage of stocks above 50 day moving average has been the most reliable indicator of "where" we are at in the cycling market and is also indicative of how desperately the prop the market coalition needs to keep the market from selling any at all.