A Day of Reckoning Fast Approaches
Below is a three-year technical chart of the S&P 500 Index. This chart contains:
- The daily returns of the index (red and more volatile series)
- A 50-day moving average (blue line)
- A 200-day moving average (orange line)
- A relative strength line at the bottom (also in blue)
Some market participants pay close attention to these moving averages for perspective on where the market may be headed next. For example, when the market is trading above the 200-day moving average, that moving average can act as “support” for market prices. In bull markets, the index tends to sharply rally when the price hits the 200-day moving average. When the daily price moves down below the 200-day average, that average then proceeds to act as “resistance.” When the daily price moves up toward the 200-day average in a bear market, the rally tends to “fizzle” at these points. Additionally, when the 50-day pierces the 200-day on the way down—the so-called “death cross”—this tends to lead to bear markets. Conversely, when the 50-day moves up through the 200-day from below, this is taken as a sign the market is about to embark on a new bull market run.
Given indications of potential economic weakness, we at WealthPlan believe the odds favor more downward pricing pressure on broader market averages. However, we acknowledge we could be wrong in this assessment, which is why we continue to maintain our long-term exposure to equity markets. At the margin, we continue to hold our slightly defensive posture within the portfolios we manage. In the meantime, we will be watching the market quite attentively in the coming days as an instructive move either way will provide context for future portfolio positioning.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Investment(s) may be appropriate for you, consult your financial advisor prior to investing. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed. No investment strategy can assure success or completely protect against loss, given the volatility of all securities markets. Statements of forecast and trends are for informational purposes and are not guaranteed to occur in the future. All performance referenced is historical and is no guarantee of future results. Securities investing involves risk, including loss of principal. An investor cannot invest directly in an index.
Advisory services offered through WealthPlan Group, a DBA for WealthPlan Investment Management, a subsidiary Registered Investment Advisor of WealthPlan Group, LLC. WealthPlan Group, LLC is not a registered investment advisor, but is the holding company for WealthPlan Partners LLC and WealthPlan Investment Management, LLC