The most important index in the world has recovered from a devastating deviation

In what almost seems like no time at all, the S&P 500 has recovered above its 200-day moving average. That's quite a feat considering it was more than 25% below its average in March, one of its worst deviations from trend ever. 

S&P 500 deviation below 200 day average

What's truly remarkable is how quickly it's gone. On average, it has taken the S&P more than 200 days to close above its average after falling more than 20% below it. This time, it took a mere 56 sessions. No other instance even comes close.  

Once the S&P moved back above its average, it continued to rally for the next week, then started to fall apart in several cases. Only that one from 1962 still showed a gain after three months. It's a good sign that the S&P is back above its average, but we shouldn't necessarily count on it remaining above. 

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We also looked at:

  • In the S&P 500, the percentage of stocks above their 50-day moving averages cycled from < 10% to > 90%
  • There was a similar move in small-cap stocks
  • The percentage of major indexes around the world above their 200-day average has risen above 0
  • More and more Australian stocks are rising above their medium-term averages
  • Dumb Money is now more confident about a rally than Smart Money
  • The Stock/Bond Ratio has returned to neutral
  • Risk Appetite is rising

The post titled The most important index in the world has recovered from a devastating deviation was originally published as on on 2020-05-28.

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