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The S&P 500 Remains Well Above its 200-Day Moving Average

May 15, 2019

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Key Technical Indicators Could Determine the Fate of US Stocks, According to the Wall Street Journal 

  • Major US indices have been pulled near technical levels closely monitored by investors as a result of frequently changing sentiment regarding US-China trade negotiations, exacerbating swings in both directions when market-moving news breaks. According to a report by the Wall Street Journal, these closely watched technical indicators are stoking stock volatility levels.  

 

  • Technical indicators are a wide range of measures that employ pricing, volume, open interest, and other forms of data to determine some sort of helpful information about a stock -- the trending direction of its price, its level of volatility, whether its overbought or oversold, and more. Technical indicators are leveraged by traders who use a technical analysis strategy to make their investment decisions.  

 

  • As the Wall Street Journal discussed, these technical indicators approaching key levels for technical traders could induce exacerbated buying or selling of a stock, magnifying its overall price movement.  
  • The S&P 500 has fallen through its 50-day moving average but has remained above its 200-day moving average
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  • The rally in US stocks during the first 4 months of 2019 that sent the S&P 500 as high as 17.51% year-to-date was in-part fueled by the index breaching some key technical averages early in the year.  

 

  • Monday marked the first time since mid-January that the S&P 500 closed below its 50-day moving average after investors sold-off US stocks on trade uncertainty and sent the S&P 500 down 2.41% for the day.  

 

We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.
We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

 

  • The S&P 500 also nearly breached the crucial 2,800 psychological support level Monday before the index rallied to close above its intraday-low. This was not the first time in the last year that the key 2,800 level helped fend-off a sell-off.  

 

  • Also on Monday, the S&P 500 managed to close above its 200-day moving average. Many technical analysts believe that the index closing above this key technical indicator helped stage the rally in US stocks on Tuesday.  

 

  • Elevated volatility levels stocks may also continue over the mid-term future, according to some strategists who note changing forecasts for economic growth, earnings growth, and the upcoming 2020 US Presidential Election. David Kelly, the Chief Global Strategist at JPMorgan Asset Management, told the Wall Street Journal, “It is possible we will see trade volatility and trade tensions all the way up until the election, because it is a strong political position.”  

 

  • For further signs of unrest in US equity markets, the Wall Street Journal points to technical indicators for S&P 500 constituents. Although 56% of S&P 500 stocks are trading above their 200-day moving average, this number is down from a peak of 73% in April -- it is, however, up from 19% at the end of 2018. 

 

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