The S&P 500 on Monday is trading above its 200-day moving average after hovering below the key technical level for over 30 sessions - its longest such stretch since April 2022, according to Dow Jones Market Data.
A common refrain among stock-market technicians is that the longer an index holds below the widely watched 200-day moving average, the more dangerous the market conditions would be for investors.
But history shows that when the large-cap index drops from at least a three-year high and then stays below the 200-day moving average for at least 30 sessions, it is often followed by strong returns for the S&P 500, said Jason Goepfert, senior research analyst at SentimenTrader.
The table below shows the S&P 500's returns following each time it cycled from at least a three-year high to holding at least 30 sessions below its 200-day moving average.
A handful of times, the S&P 500 experienced tough times after these signals, with double-digit losses over the following year, most notably in 2000 and 2008, Goepfert said in a Monday client note.
"But most of the time, of course, that did not happen. Even though its average return and risk/reward weren't impressive over any time frame, they were mostly positive from two months and beyond," he said.