The 200-day SMA (Simple Moving Average) is a widely followed technical indicator used by traders and investors to assess the overall trend of an asset. When stocks rise above their 200-day SMA, it is generally seen as a positive sign and considered a bullish development. The logic behind this idea is that if the stock's price has been consistently higher than its long-term average, it indicates strength and potential for further upward movement. Conversely, if stocks drop below this level, it is viewed as a bearish signal, implying weakness and the possibility of more downside. Monitoring the percentage of stocks above the 200-day SMA can provide valuable insights into the overall health and direction of the market. Therefore, today, we will examine the percentage of stocks in the S&P 500 Index that are currently trading above their 200-day SMA.
Since SPX’s lows in October 2022, there have been three significant peaks in the index, particularly on 13th December 2022, 2nd February 2023, and 1st May 2023. From October 2022 lows until the peak in December 2022, the percentage of SPX stocks was rising (as a matter of fact, this metric started to grow even sooner than the index, in late September 2022). However, after constituting a high in December 2022, SPX started to decline, and so did the percentage of SPX stocks above the 200-day SMA. This decline did not last long, and SPX began to rise again toward the end of 2022 and early 2023. The growth was sustained until 2nd February 2023, and after that, SPX started falling until a low on 13th March 2023. Then, the index began to rise again until 1st May 2023.
The SPX was accompanied by a rising percentage of SPX stocks above the 200-day SMA on the first two legs up. But on the third leg up, SPX was accompanied by the growing metric only until early April 2023. Then, in mid-April 2023, the metric started deviating from the increasing (or sideways-moving) price of SPX. This catches our attention as it can potentially imply exhaustion for the rally, showing more and more stocks turning bearish while the index continues to hold up.
Illustration 1.01 Illustration 1.01 displays the daily chart of SPX (on the top) and the percentage of SPX stocks above 200-day SMA (on the bottom).
Technical analysis gauge Daily time frame = Neutral/Slightly bearish (showing a lack of trend/momentum) Weekly time frame = Neutral *The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Trade active
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SPX broke to the upside from the range between $4,050 and $4,200. This is a bullish development. If the price holds above this level for two days, it will further bolster the odds of a continuation higher for the short-term.
The blue chips will be the last to drop, but they're all due for a pullback imo. I also like to monitor the SPX stocks above their 50 and 20 day sma's, which are more oscillators. When all 3 sets are down, it's a great buy indicator.
Really like the statements you pointed out, looking solid as always. Thank you for sharing!
TradingBrokersView
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Very good study and solid update. Continue publishing great content!
TheCryptagon
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Strong setup. Thanks for sharing.
InvestingScope
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Very interesting view on the current price action.
Setupsfx_
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Amazing work thank you
francisoconnell
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A bit lost here, what trade is active?
Tradersweekly
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@francisoconnell, None, sorry. It is just an update to the article. But I noticed that more people asked this. Should I update it just through "comment" to avoid confusion?