# INTRODUCING THE TPA MARKETSCOPE

**INTRODUCING THE TPA MARKETSCOPE**

**TPA will now provide the Marketscope every day in the World Snapshot – explanation below.**

__TPA MARKETSCOPE EXPLAINED__

__TPA MARKETSCOPE EXPLAINED__

## Market timing is not a complete investment strategy in and of itself, but should be utilized as a tool for successful investing. Knowing when stocks are at extremes can present investors with opportunities and help them to avoid pitfalls. The TPA Marketscope uses a set of carefully watched indicators to assess if the market is at or near extremes. When the market is oversold, risk-return favors buying and not selling and when the market is overbought, risk-return favors selling and not buying.

**TPA MARKETSCOPE**

**TPA MARKETSCOPE**

The seven indicators in the TPA Marketscope were developed after years of observation and the extreme limits used have historically been levels that mark short-term and medium-term inflection points. __The indicators are explained below.__

__Indicators explained:__

**Short term market score** – is a daily analysis of the S&P500 relative to the normal distribution using the 2 standard deviation Bollinger Band. TPA then adjusts the score by the amount of overbought or oversold as measured by RSI.

**Percent stocks above or below the 2 standard deviation Bollinger Band** – Bollinger Bands identify ranges using standard deviations away from a moving average. They, therefore, measure volatility (the width of the band) and extremes (using normal statistical distributions). In a normal distribution, 2 standard deviations identifies 96% of all occurrences. As a stock reaches the extreme of the 2 standard deviation Bollinger Band, it becomes more probable that the price will regress back to the mean. TPA has found that historically market reversions are very likely when 40% of stocks are above or 60% of stocks are below the 2 standard deviation Bollinger Band.

**Percent stocks above the 50DMA** – when a large number of stocks (85%) are trading above their 50DMA, the market is at an overbought extreme. When a small number of stocks (15%) are trading above the 50DMA, the market is oversold.

**Percent stocks RSI above 70 or below 30** – RSI is a measure of the speed and size of a recent move in a stock or index; the greater the price move and the quicker that move has taken place, the higher RSI. TPA has found that historically market extremes occur when 30% of stocks are trading above RSI 70 or when 55% of stocks are trading below RSI 30.

**Percent stocks 50DMA>200DMA** – This is a longer-term measure of extremes. An uptrend is defined when short term prices consistently trade above longer-term prices. An example of an uptrend is Last > 20DMA > 50DMA > 200DMA. Technically, a long-term uptrend is defined by the 50DMA trading above the 200DMA. TPA has found that historic oversold extremes occur when 22% or less stocks are trading 50DMA>200DMA. The overbought extreme has become trickier since it has been declining since 2010 as a small number of TECH stocks have garnered an increasingly large percentage weighting in the S&P500. Currently, the extreme is approximately 40% to 50% of stocks trading 50DMA > 200DMA.

*TPA notes that not all of these indicators are equally consistent.** **Clients should use the “Historical Importance” comments to determine the weight they will assign to each alert.*