Posted: October 20, 2023 at 5:15 PM ET
The S&P 500 ended a busy week for US markets on Friday by breaking below its 200-day moving average for the first time in more than six months. It also erased the last of its gains from the summer advance that peaked in late July.
The SPX fell 53.84 points, or 1.26%, on Friday to end the week at 4,224.16 after falling for the fourth straight day, marking the index’s lowest closing level since June 1, and also the first close below its 200-day move. The average – which has reached 4,233.17 – since March 17.
The S&P 500 ended a busy week for US markets on Friday by breaking below its 200-day moving average for the first time in more than six months. It also erased the last of its gains from the summer advance that peaked in late July.
The SPX fell 53.84 points, or 1.26%, on Friday to end the week at 4,224.16 after falling for the fourth straight day, marking the index’s lowest closing level since June 1, and also the first close below its 200-day move. The average – which stands at 4,233.17 – since March 17. The S&P 500 fell 2.4% this week, its worst week in a month, and has now finished lower in five of the past seven weeks.
The index is down 6.8% from its closing high on July 31, FactSet data show, but is still up 10% year to date.
Although a break below the moving average is usually viewed as a bearish signal, other indicators suggest the S&P 500 has fallen into oversold territory which could herald a new turn higher as soon as next week, he said. Technical analysts.
“In my view, this market has become pretty oversold,” Craig Johnson, chief market technician at Piper Sandler, said during a phone interview with MarketWatch.
Piper Sandler’s proprietary database of all U.S.-traded stocks with a market capitalization over $25 million and a share price over $2 showed that only 18% of stocks traded above their 40-week moving average, the level reached. Only 10 times since then. Johnson said in 1987. Often, when many stocks are trading at such low levels compared to their recent performance, it signals that a turnaround may be near.
“It’s really rare to see readings this low,” Johnson added.
Moreover, more than 65% of S&P 500 stocks traded below its 200-day moving average as of Friday’s close, the highest reading in a year, according to FactSet data. All of this is consistent with what Johnson and others have described as “exhaustion” in stocks.
In March, when the index last closed below the 200-day moving average, it stayed below it for only six sessions. Dow Jones data showed that the S&P 500 closed below the 200-day moving average for five straight days from March 9 to March 15, then closed below the average again for one day on March 17.
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