The S&P 500 has finally provided investors with some relief lately, last week climbing above its 50-day moving average for the first time in 60 trading days.
Now, there’s nothing magic about the 50-day moving average. The index stayed above this level for weeks in March-April, only to soon turn lower again, and such action is often seen during bear markets. Besides, the S&P 500 remains some 10 per cent below its 200-day moving average, a more significant and widely-watched trend indicator.
Still, the recent strength will be welcomed by weary investors. The index’s 60-day streak below its 50-day average was the longest since 2008, notes Bespoke Investment.
Bespoke notes the tech-heavy Nasdaq 100 has also ended a long three-month spell below its 50-day average. Since 1990, there have been only seven times when the index stayed below that level for so long.
Although subsequent near-term weakness isn’t uncommon, this tends to be a good sign for tech stocks. Bespoke says on all but one occasion (in 2001, following the dotcom crash), average returns were very high over the following three-, six- and 12-month periods.
