The S&P 500 spent 13 days below its 200-day moving average before reclaiming it with a 2.5% rally yesterday.
Here’s the chart:
Let's break down what the chart shows:
The top panel shows the S&P 500 as black candlesticks.
A red line displays the 200-day moving average.
The bottom panel shows the number of consecutive days the S&P 500 traded below its 200-day moving average as a black line.
The Takeaway: The S&P 500 just reclaimed its 200-day moving average after spending 13 days below it.
Yesterday’s rally pushed the index 2.5% higher and flipped the long-term trend back to bullish.
The 200-day moving average is one of the most watched lines in the market. When the S&P 500 trades below it, investors start getting defensive and money rotates into safer areas of the market. When price moves back above this line, money usually flows back into growth names.
The drop below the average happened while geopolitical risk climbed. The Iran conflict pushed money into safety trades. Defensive sectors caught a bid while growth stocks lost ground.
That pressure began to fade this week as news of a ceasefire cooled the panic trade tied to the conflict. Money started rotating out of defensive areas and back into higher beta names, and the S&P 500 pushed back above its long-term trend.
Technology took the brunt of the selling during the conflict, dropping about 16% as investors rushed into defensive areas like Consumer Staples.
I am watching tech names closely now because the groups that fall the hardest during fear often lead the rebound when buyers step back in.
If there is a specific tech name you want me to look at, send it over.
Grant Hawkridge | Chief Aussie Operator, All Star Charts
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