Average true range

File this under my list of "other technicals" - multiple moving averages across time-frames, RSI, Bollinger bands (first three are the basics), advance-decline volume difference, and average true range, and let's throw in Elliott wave structure in there too.

If time permitted % of stocks above/below D50MA / D200MA would be helpful, but if at a fund I would just do it via pivots across all stocks in the indexes. Ie, in all the S&P500 what is the pivot status of each stock? And what is the sector picture? It would be likely to see the component message before the index message, or at least confirming. 

I digress. Here is the average true range on the weekly SPY chart, with a red line shown at current level and arrows on SPY where the market has reached this level during 2009+. 

Like the other technical indicators, there is not just one thing and nothing is ever 100%. Here's the list of the arrows:

March 2010, few weeks from major top and correction
Dec 2010, market higher for several months into April 2011, but not by much
Oct 2012, middle of mild drop
Jan 2013, no damage in middle of QE run higher
Nov 2013, higher but not by much, mild drop Jan 2014
June 2014, preceded mild drop
Aug 2014, preceded correction

And now. A lot of the mild pullbacks above tested the weekly 20MA and the larger drops went to the lower BB or 50MA. We just had a test of the weekly 20MA, so if the market was setting up for larger drop then lower BB & 50MA are both 222-224 and rising. Or the more positive version could play out, higher but not by much and several weeks or months of consolidation. 

I confess that the same indicator in the 2004-07 rally didn't work as well, because so much of the climb was very dull and so a lot of the weeks were lower range. Going back to the 1995 rally, the reason why VIX was increasing was because average true range was increasing as well. Does this mean the chart above is more an anomaly than true market condition? Perhaps, but this is why no indicator can be understood in isolation, and why I am trying to build a picture of the most likely path forward given the collection of these tools - pivots, other technicals, valuation & fundamentals, sentiment and timing - all applied to stocks, safe havens, sectors, global indexes, currencies & commodities.