A trader works on the floor of the New York Stock Exchange. Photograph: Michael M. Santiago/Getty ImagesStocks have retreated lately, with the S&P 500 falling below its 50-day moving average for the first time in over four months. Is this indicative of further weakness?
Usually, no. Since 1990, there have been nine occasions where the index fell below its 50-day average for the first time in over four months. A month later, notes the Carson Group’s Ryan Detrick, it’s been higher eight times. A year later, stocks gained on all but one occasion, bagging above-average returns of 14.1 per cent.
Recent weakness isn’t surprising. Historically, notes Bespoke Investment, August has “usually been the lousiest” in the years when the S&P 500 was up at least 10 per cent through the end of July.