• 340 days Will The ECB Continue To Hike Rates?
  • 341 days Forbes: Aramco Remains Largest Company In The Middle East
  • 342 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 742 days Could Crypto Overtake Traditional Investment?
  • 747 days Americans Still Quitting Jobs At Record Pace
  • 749 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 752 days Is The Dollar Too Strong?
  • 752 days Big Tech Disappoints Investors on Earnings Calls
  • 753 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 755 days China Is Quietly Trying To Distance Itself From Russia
  • 755 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 759 days Crypto Investors Won Big In 2021
  • 759 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 760 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 762 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 763 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 766 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 767 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 767 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 769 days Are NFTs About To Take Over Gaming?
Prieur du Plessis

Prieur du Plessis

With 25 years' experience in investment research and portfolio management, Dr Prieur du Plessis is one of the most experienced and well-known investment professionals in…

Contact Author

  1. Home
  2. Markets
  3. Other

SP500: Santa Betters 200-day Moving Average

Santa Clause delivered some good news to investors on the last trading day before Christmas, with the S&P 500 Index taking out a spread triple top and breaking its 200-day moving average - a key indicator of the primary trend of the stock market. This was the fourth attempt of the Index since October to trade and stay above the 200-day line. It is obviously premature to speculate whether this will be fourth time lucky, especially as stocks rose on very thin volume. The Index a few days ago also breached its 50-day moving average - an intermediate term indicator. However, in order to be entirely bullish the 50-day MA also needs to cross the 200-day MA, and both averages need to be in uptrends.

SPX
Source: StockCharts.com

The number of NYSE stocks trading above their respective 50-day moving averages has increased to a respectable 69% from almost 21% in November. In order to be bullish about the secondary trend, one would expect the majority of stocks to be above the 50-day line. As an aside, Consumer Staples (90%), Utilities (85%) and Industrials (70%) are the strongest sectors, with Technology (51%) and Energy (40%) the weakest. In order to be bullish about the secondary trend, one would expect the majority of stocks to be above the 50-day line.

Stocks above 50-Day MA
Source: StockCharts.com

However, for a primary uptrend to manifest itself, most of the index constituents also need to trade above their 200-day averages. This is a slow indicator, and the number at the moment is 50%. This is a big improvement on November's 21% reading, meaning half of the 500 S&P Index constituents are now in uptrends.

Stocks above 200-Day MA
Source: StockCharts.com

In addition to the above, the fact the S&P 500 Index (and many other major stock market indices) has formed a higher low in December is positive. After all, higher lows are how a new trends starts. On the downside, breaks below the November lows would confirm a resumption of the downtrends.

Time will tell if Santa has in fact brought good news this time. Happy holidays!

 


Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

 

Back to homepage

Leave a comment

Leave a comment