The S&P 500 Just Can't Make Up Its Mind

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« Bespoke's Paul Hickey on CNBC Today (11/2) at 2:45 PM | Main

Talk about indecision.  A look at the chart of the S&P 500 over the last few days gives a great illustration of the tug of war taking place between bulls and bears.  After closing below its 50-day moving average (DMA) last Wednesday, the index quickly overtook that level on Thursday.   Following the stronger than expected Q3 GDP report, the S&P 500 had its best day in three months and closed 1.4% above its 50-DMA.  But the party was short-lived.  No sooner than the S&P 500 closed above its 50-DMA, the bears stepped back in on Friday and the S&P 500 closed 1.4% below its 50-DMA.  Today, the index looked poised to break back above the 50-DMA following a stronger than expected ISM report, but once again the sellers have come back into the market.

While up and down movements in the market are not uncommon, the specific pattern we've seen over the last few days is so rare that it has never happened before.  Going back to 1928, the S&P 500 has never had a three day sequence where the index broke and closed below its 50-DMA one day, then snapped back and closed more than one percent above the 50-DMA the next day, only to sell off on the third day and close more than 1% below the 50-DMA.  While this indecision will eventually work itself out, today's whippy trading makes it seem like the pattern is only becoming more intense.

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November 02, 2009 at 01:49 PM in Market Analysis | Permalink

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