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Daily State Of The Markets: Bull Vs. Bear - The Line In The Sand?

David Moenning profile picture
David Moenning


  • Don't look now fans, but it looks like the line in the sand between the bulls and the bears has been drawn.
  • But to be sure, there is a lot more at work here than a simple moving average on a chart.

On Tuesday, February 5 and again on Wednesday, February 6, the S&P 500 bumped into its 200-day moving average. While I'm not exactly sure why this particular indicator captures the attention of so many (there are a myriad of more effective trend-following tools readily available), the crossing of the 200-day is viewed as a big deal. Some go so far as to say the moving average represents a line in the sand between the bulls and the bears. As in, if the current price of a security or index resides above its 200-day, it is considered a bull market and if below, a bear market.

Personally, I don't subscribe to such a view. However, it is worth noting that a great many investors, including throngs that get paid to invest other people's money, do see the 200-day as a critical line of demarcation. Thus, how the market acts when it approaches its 200-day is viewed as important.

So, what was the market's reaction when the S&P 500 "tested" its 200-day for the first time in 42 days? See for yourself...

S&P 500 - Daily

View Large Chart

While I wouldn't call it an abject failure, the index did pull back a bit after flirting with the all-important line in the sand for a couple days. So, the question, of course is what, if any message should we take from the initial "bonk" at the 200-day?

The Bull's View

Always optimistic, those wearing their bull caps last week viewed the action as positive. The words "a pause that refreshes" were bandied about quite a bit in the bull camp. After all, even the most ardent bull will admit that stocks have run a long way in a short period of time, that the indices are overbought, and that sentiment has rebounded quite a bit. As such, a brief respite before the

This article was written by

David Moenning profile picture
David Moenning is founder and Chief Investment Officer at Heritage Capital Research, a Registered Investment Advisor. Heritage is an independent, privately owned, investment management firm located in the Denver area. Mr. Moenning has more than 33 years of portfolio management experience and focuses on a risk-managed approach to capital markets via modernized portfolio development and dynamic adaptation to ever-changing macro environments. Most recently Chief Investment Officer for a $1.3 billion RIA firm.

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