August 19, 2009
Market Recovery?
Many pundits are talking about two positive “technical” bullish signs for the market and I thought I’d pass them on.
Golden Cross
Below is the S&P 500 and the 50-day moving average and the 200-day moving average. When the 50-day line crosses the 200-day (look in June / July), that’s a bullish sign. According to Ned Davis Research, when the 50-day > 200-day, the market’s historical annualized gain is 9.0%. When the 50-day is below the 200-day, the market’s historical annualized gain is -2.0%. Though not a perfect predictor, one can see why it’s viewed as a positive thing.
S&P500 50-day crossing 200-day
200-day moving average now rising.
According to Schwab Research, we’re now exiting the 3rd longest decline in history for the S&P 500’s 200-day moving average. On average, coming out of that type of a decline, the S&P 500 is up 20+% one year later. Again, though not a perfect predictor, one can see why it’s viewed as a positive thing.
S&P 500 Longest Streaks with a Declining 200-Day Moving Average (1928-2009)
Start End Duration (Days) S&P 500 S&P 500 +1 yr
9/17/30 9/27/32 741 -61.8% 18.7%
4/7/41 9/22/42 533 -13.6% 40.7%
7/7/69 11/27/70 508 -13.2% 7.0%
7/26/73 4/15/75 628 -21.4% 16.2%
1/25/02 4/30/03 460 -19.1% 21.5%
1/3/08 7/27/09 571 -32.1% ??
Average 20.8%
Filed under Blog, market insights by Matt Hudgins
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