The S&P 500 has rallied off of its October and December lows, but the 200-day average, which rolled over in April 2022, continues to fall.
More Context: Price trends matter. Over the past 2+ decades, all of the net gains for the S&P 500 have come when the index’s 200-day average has been rising. When the trend has been falling, the index has struggled to keep its head above water. While stocks have begun 2023 in rally mode, they are still fighting a downtrend. Stocks can rally within persistent downtrends. But if stocks keep rallying, down-trends cannot persist. The math just doesn’t work. While we are seeing evidence of a tactically more constructive environment, the longer-term trend backdrop remains challenging. The recent strength has a better shot at being sustained if it can flip some of the longer-term trend indicators to a bullish setting.
In our Market Notes, we take a closer look at longer-term price trends, recent breadth improvements and paradigm shifts that are taking place within global equities.
