Over the last several months we have seen unprecedented shifts in market sentiment in terms of both the degree and velocity. Another example of this can be illustrated by looking at the recent moves in the S&P 500 and its 50 and 200-day moving averages. On August 30th, the S&P 500 closed below both moving averages. Then, two days later, the S&P 500 rallied and closed above both levels.
The party didn't last long though. Friday, the S&P 500 is down 1.3% and poised once again to close lower than both of its key moving averages, resulting in a 'round trip' to the downside in less than two weeks.
We went back to the end of WWII to find all the days where the S&P 500 made similar round trips in less than two weeks. Over the last 62 years, there have only been eleven other occurrences, which we highlight below. While our initial assumption was that this type of move would be a negative signal, we were surprised to see that going forward, the results are mixed.
Over the next week and month, the S&P averages gains, while over the next three months, the index averages a fractional loss.