Erik Swarts has one of the best financial blogs out there on MarketAnthropology.com. One of his favorite topics that I’ve been keeping abreast of lately is the idea of a Meridian Market indicator.
Check out a detailed video on the topic here — though personally, I have to mute “The Maker” even if the concept is fascinating. (Sorry Willy.)
If you can’t sit through a four-minute video, here’s the gist: The historical uptrend of the S&P 500 that spans three decades hasn’t been steady, but rather punctuated with periods of lows and highs. However, there’s a pretty clear middle line — a meridian — and at key moments when the S&P index touches this line, it can portend a breakout or breakdown. This includes both our recent “irrational exuberance” and the subsequent 2008 crash.
And in the last few weeks we have seen two unsuccessful challenges to the meridian, by Erik’s calculations. A failure to break through could portend another crash.
Swarts writes: “While it should never be a primary focus or outright trade thesis, keeping an eye on a potential set-up — outside of normal distribution, makes sense at times. I have always found in my work that the greater the preparation, the greater the contrast — which creates more depth to work from.”
- On the other hand, breadth for the S&P remains strong. (Markets Stream via MarketWatch)
- 1,422 is a big resistance point for the S&P. (Markets Stream via MarketWatch)
- Oh yeah, and midcaps are seeing resistance, too. (Minyanville)
- Options trader John Jagerson warns that it may be time to get bearish. (InvestorPlace)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.