July 8th 2010
Bear Takes a Bite Out of the S&P 500
- Dugald Malcolm, Montreal
Recent market action has resulted in the bear striking a considerable technical blow to the charts of the S&P 500. When I last provided an update in early June, the charts showed the S&P 500 struggling around resistance at the 200 day moving average. Although it managed to sneak just slightly above it for a few trading sessions, there were just not enough trading volume to keep it there. From an intraday high of 1,131.23 on the 21st of June, the S&P 500 shed close to 10% by July 2nd. The severity of the decline, however, was not the biggest problem with this recent move. The most significant problem lies in where the market slide technically took us on the charts.
To begin with, not only has the S&P 500 moved below its 200 day moving average, but so has its 50 day moving average. The result is what is called the Death Cross, a very bearish indicator indeed. The las time we witnessed a Death Cross of the moving averages was at the end of 2007.