This is a chart of the S&P 500 SPDR. Spider (SPDR) is a short form name for a Standard & Poor’s depository receipt, an exchange-traded fund (ETF) managed by State Street Global Advisors that tracks the Standard & Poor’s 500 index (S&P 500). The S&P 500 “is a stock market index tracking the stock performance of 500 large companies listed on exchanges in the United States. It is one of the most commonly followed equity indices.”
In the 6 months since the market peaked on 12/27/22 @ 474.96 to the low it hit on 06/13/22 when it closed @ 365.86 the market dropped a total of 109.10 point or a drop of 22.97%. A rule of thumb for bear markets is a 20% decline from the closing high. Interestingly, from a technical trading standpoint, a bear market is typically defined as when a market closes below its 200 moving average. The 200-day moving average is the average of the closing price over the last 200 trading days. An exponential moving average (which is what the chart above displays) puts more weight on the more recent dates. In the chart above we see that while the SPDR touched its 200-day exponential moving average intra-day on 06/13/2022 the day the market closed at its most recent low, the marker never actually closed below its 200-day MA and is now again significantly above it.
The difference between fundamental analysis and technical analysis is that fundament analysis relies on the interpretation of the facts. Fundamentally, I am about as bearish as I can be. That said, technical analysis is strictly about what the charts say. On a technical basis, right now, the market (S&P 500) looks strong. Until this changes, one should assume that it will continue to be strong until it isn’t.
There is an old saying, it’s a staircase on the way up but an escalator on the way down. Now is a good time to add or update your stop-loss orders.