top of page
Search

SPX 50-day, 200-day, 40-week, 200-week, and 40-month Moving Averages

The press and media often quote the 200-day ma and 50-day moving averages, and many traders and investors act on their buy and sell signals.


Some believe the reason moving averages work is based on the concept of the self-fulling prophecy. If enough investors use the same technical indicators, they can influence the direction of the index or market.


It is reasonable to expect the pivotal intermediate-term moving averages (40-week and 200-day) to be more dependable than shorter-term moving averages (i.e., 10-day, 30-day, 50-day, etc.), at least from an intermediate-term perspective.


From the structural to longer-term basis, the 40-month ma and the 200-week have successfully called all structural bull and bear trends in the SPX Index (SPX) since the 1920s.


Successful tests of the 40-month and the 200-week moving averages have led to the resumption of the structural bull trends (i.e., 1982-2000 and 2013-present).


On the other hand, violations of the 40-mo ma and 200-week ma, and most importantly, the rolling over (downtrend) of the long-term moving averages have resulted in structural bear/trading range markets (i.e., 1966-1982 and 2000-2013, etc.).


During the Feb-Mar 2020 pandemic-induced cyclical bear decline, SPX slightly breached the two weekly moving averages (50-wk and 200-wk) but quickly reversed above these moving averages during April 2020, reaffirming the resumption of the May 2013 structural bull. Also, during the recent Oct 2022 correction, SPX successfully tested and rebounded from the 200-week ma.


The recent violation of the popular 50-day ma (4,429) in mid-Aug 2023 warns of a retest of the pivotal 200-day ma (4,206).


Although the 10-week ma (4,401) and the 30-week ma (4,301) are popular moving averages, the 40-week ma (4,229) may be a better intermediate-term indicator since it equates to the 200-day ma as the 40-week times five days translate into the 200-day ma.


SPX moves toward another critical intermediate-term inflection as it challenges the 200-day ma (4,206), 40-week ma (4,229), and 30-month ma (4,240).


A successful test will likely result in an SPX recovery, with at least a near-to-intermediate-term bounce. Remember, the integrity of the rally will decide if this is an oversold rally and the resumption of a bear trend or an intermediate-term market bottom and the start of a year-end rally.


A convincing breach of the 200-day, 40-week, and 30-month moving averages opens the door for the next SPX selloff toward the longer-term moving averages, as represented by the 200-week ma (3,925) and 40-month ma (4,091.5).


Will this lead to a selling climax that alleviates the overbought conditions from the October 2022 rally and the resumption of the May 2013 structural bull rally?


Source: Chart courtesy of StockCharts.com

Source: Chart courtesy of StockCharts.com

Source: Chart courtesy of StockCharts.com

55 views0 comments

Recent Posts

See All

Closing of the Newsletter

Dear clients, After four rewarding years, the time has come for me to close the Lee Technical Strategy Newsletter, effective today. I want to take this opportunity to let you know what a great honor a

Technical Review of the Top 25 NDX 100 Index Stocks

NASDAQ 100 Index (NDX) – NDX is a modified market capitalization-weighted index comprising 100 of the largest non-financial companies on the NASDAQ Composite Index (COMPQ). NDX is heavily weighted tow

Comments


bottom of page