The 7th-Best Time to Buy Stocks in 22 Years?

By Guy Lerner | February 19, 2008 | 1:52 PM | 0 Comments

Although I only have data going back to 1986, I believe this is one extreme in a market data point that might have some significance.  If not significant, then it is at least interesting.

Figure 1 is a weekly chart of the S&P500, and the indicator in the lower panel looks at the number of NYSE issues trading above their 40 week moving average.

Figure 1. % Stocks Above 40 week MA

Currently, only 19.31% of stocks on the NYSE are above their 40 week moving average, and this low number has been seen only 6 times in the last 21 years:

1) October, 1987; 2) September, 1990; 3) December, 1994; 4) October, 1998; 5) September, 2001; and 6) October, 2002.

While the data only extends back 22 years, the extreme lows in this indicator clearly highlight significant market lows that are part of market lore. Despite its limited history, I like this indicator because it has been selective at identifying the most significant low points of the last 22 years.

Can you think of any better time to buy in the last 22 years than the 6 dates listed above? 

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