With most of last week’s negative developments behind us, let’s discuss a favorable development (of sorts).
Many technicians watch the S&P 500’s 12-month moving average for major bull/bear signals. This is a simplistic, but surprisingly accurate chart analysis where the monthly closing price of the S&P 500 is plotted versus a 12-month moving average.
Here’s the recent record (all prices last day of the month):
- September 2000: Sell 1,477
- April 2003: Buy 917
- November 2007: Sell 1,462
- June 2009: Buy 919
At the end of May, the 12-month moving average of the S&P 500 stood at 1,071.27, or 18.14 points below May’s closing price.
Another variation of this method uses a 252-day moving average since there are 252 trading days in a year. That method produces a moving average at 1,071.27. The record is similar, although, in my opinion, much too sensitive.
But whatever method of analysis you use, it is clear that the bulls must hold the line or be crushed.
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