This chart shows the percentage of stocks above the 200 day moving average on a weekly chart.   As you can see in 2009 the number of stocks represented in this category was at a very low level.  When the move up in equity prices began in earnest in March 2009 this percentage rose quickly and peaked near 90% and began to fall slowly and then fell hard during the recent market correction.   The brief fall in Jan. 2010 gave warning to the probability of another market correction.  Note the return almost to the 90% area and then a quicker harder fall from April to the current bottom in July.

The picture below is a picture of the same moving average reference using the monthly chart.   On the monthly chart you can see back into 1998 and you can tell hitting 80 or 90 percent does not occur often.   In 2003/2004 we had a consolidation that lasted approximately 10 months.   Stocks fell to the 40-50 range much like our market in 2010.

In 2007 the number of stocks hitting their 200 day moving average as a percentage reached 86% and this time the market fell hard and it did so bottoming in March 2009.

In 2010 the number of stocks above the 200 day moving average hit 90% again and the market corrected for several months and it corrected at the 40-50% level similar to the 2003-2004 time frame.

Lows that have occurred in the market can be seen when this percentage reaches 20% and 10% figures.  These areas have been excellent indicators of over sold conditions in the market that are followed by strong up moves in stocks.

As you can see the deeper the correction the stronger the rise in stocks, typically.