Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

S&P500 Stuck Below Its 200-Day Average

Stock-Markets / Stock Markets 2010 Jun 08, 2010 - 08:32 AM GMT

By: Richard_Shaw

Stock-Markets

Best Financial Markets Analysis ArticleThe S&P 500 index (proxies SPY and IVV) has closed below its 200-day average now for 11 straight days. Outside of the "2008 pre-crash" that lasted about 4 months beginning 12/27/07, and the 2008 crash that lasted about 12 months beginning 5/20/08; the current period below the 200-day average is the second longest in the past several years. That's a bad sign.


There were six episodes in 2007 before the 4-month 2008 pre-crash. Those periods below the 200-day average ranged from 1 day to 19 days. There were two periods in 2009, of 1 and 2 days, as the index worked its way out of the cellar, and as the 200-day average was flattening before trending upward.

This period below the 200-day average is the first of 2010, and is showing signs of "commitment" to being there below that average.

Many investors consider a price below the 200-day average to be a bear condition. It's not yet at the 20% decline that others call a bear, but it certainly is not a good sign -- and the US market is the best market this year -- most others look a lot worse.

Here is a compressed chart that can give a flavor of the periods below the 200-day average (shown in red). Of course to count closings below any average, you need to use a greatly expanded chart which would not fit on your screen as an image.

For a closer look at the current period below the 200-day average (shown in gold, with 100-day shown in blue), this candle chart speaks loudly. Today's big drop suggests that Monday will probably be below the 200-day even if there is a rally, because the current price is about 3.8% below the average. It would take a big rally to get back over the 200-day average. We don't see the makings of that anywhere in the news.

It may only be VooDoo chicken bones on the ground, but in the past 11 market days, it looks like the index has tried and failed to pierce the 200-day average, which appears now to be a resistance line.

In any event, we've been out of the US equity market since the S&P 500 declined to 1180 to 1140 (7% to 10% above the current prices) depending on the client and their particular risk tolerances (basically exiting back in early May).

For added perspective, we personally exited Europe (VGK) at a price about 19.7% above the current price in late October 2009. We exited China (FXI) in early December 2009 at a price about 8% above the current price, and exited Brazil (EWZ) in late December 2009 at a price about 13.8% above the current price. However, we were not as effective with emerging markets in the aggregate (EEM), because we did not exit that security until mid-May at a price less that is about 3.7% higher than the current market

At this point, we are happily ensconced in cash and bonds, and won't be getting back into equities until the upward trend has resumed in a believable way security-by-security. We don't plan on buying anything that is below its 200-day average, plus some other requirements.

Holdings Disclosure: As of June 4, 2010, we do not own any securities mentioned in this article in any managed accounts.

By Richard Shaw  http://www.qvmgroup.com

Richard Shaw leads the QVM team as President of QVM Group. Richard has extensive investment industry experience including serving on the board of directors of two large investment management companies, including Aberdeen Asset Management (listed London Stock Exchange) and as a charter investor and director of Lending Tree ( download short professional profile ). He provides portfolio design and management services to individual and corporate clients. He also edits the QVM investment blog. His writings are generally republished by SeekingAlpha and Reuters and are linked to sites such as Kiplinger and Yahoo Finance and other sites. He is a 1970 graduate of Dartmouth College.

Copyright 2006-2010 by QVM Group LLC All rights reserved.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

Richard Shaw Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in