40 Week Moving Average Tells the Tale

I started keeping a more detailed watchlist spreadsheet in late July.  It's been very helpful and I'd recommend it to anyone.  It's simple now; I track the date I became aware of the stock, what screen produced it, what kind of pattern the stock is in, what I think the buy point is, information about the stock's relative strength and the same measure of the stock's industry group.  I hope to write my own web application eventually that will track this data and give me more advanced sorting and reporting features on it, but for now a spreadsheet does the trick.

With the tremendous volatility of the past weeks persisting in a huge downward move in the market today, I wanted to take a moment to review my list and see how the stocks look.  To no great surprise, of the 25 stocks on the list, only four are above their 40 week moving average.  It's almost more shocking that nearly 20% of the list has managed to hold that level.  I expect the numbers are worse than that across the broad market.

With an assumed four out of five stocks this heavily beaten down, record volatility, massive credit freeze and a slowing global economy does this market have any chance to rally?

I have no idea, but I want to be ready if it does.

Of my four watchlist stocks that have managed to hold their 40 dma, all are related to the medical field (another bearish indicator, as this tends to be a so-called 'defensive play') and all belong to an industry group in the top 10% of the market in relative strength (no surprise here, either).  Two of the stocks actually belong to the same industry group, and I owned one of them previously and have never taken my eye off of it.  It's shown tremendous resilience in this bear market, and is in the best shape of any stock on my watchlist now - trading just below it's 50 day moving average.  This stock would be my first (and perhaps only) buy if the market followed through tomorrow.

It's difficult to make any sense of the current market, so I won't try.  I'll continue to track whatever solidly fundamental and technical stocks appear on my screens and watch the market for the signal indicating a rally.

-Geoff