S&P 500 200-Day Moving Average Spread at -32%

Multiple market pundits have recently mentioned that the S&P 500 is trading the furthest below its 200-day moving average since the Great Depression.  Below we have plotted the 200-day spread indicator going back to 1927.  The index is currently trading 32% below its 200-day moving average, which is indeed the most negative spread since 1937. 

While the spread can remain negative for quite some time, the reaction to the upside has been extreme once the market turns.  In the 1930s, and even following the big declines in the 70s, 80s, and early 2000s, the spread turned violently positive in the months following the ultimate low in the 200-day spread.  Unfortunately, nobody knows when that low will be.

click to enlarge

Comments

[Did U Think...:]

By your own chart, the Dow stayed well below the 200 DMA during the entire period 29-32. Is there any question whatsoever that this crash is going to be as big a pooch screw as back then? No really, any question at all? And if so, why is there any question because we had the biggest credit orgy of all time and it is now bust. It kills me when people say "we are due for a rebound because when we compare today to periods except the great crash...."

Sorry, but the ONLY useful comparison is 29-32 unless you want to go back to the panic of 1873. Just might as well stop talking about anything else. The Ponzi scheme is OVER.

2008 Nov 18 09:21 PM