2011

We once again breached the 200-day moving average line in 2011. Two hundred days prior was October 2010 (red arrow). The first thing we notice is that the S&P fell below the numbers we were dropping and the numbers we were dropping going forward were going to be higher than where we were. Notice the moving average line rolled over. It was resistance until January 2012 (not shown).

By January 2012 we were dropping March 2011 so the numbers were more even. There were still those higher readings in April and May to be dropped but the challenge was not nearly as difficult as it was in August. This is point F on the long-term chart.

2015

Finally, let’s check in on 2015. Once again, we broke down in August and this time we were dropping early November 2014 (red arrow). This was a clear example of replacing higher prices with lower prices and you can see how quickly and easily the moving average line turned down. You can also see how it was resistance on the rally, even if it didn’t stop there exactly.

We did not cross back over the 200-day moving average line until March 2016 which was about nine or 10 months after we first went under it. By then we were dropping the August plunge so it was easier to move back over the moving average line.

This brings us to today, and the now well-watched 200-day moving average line that we seem to be toying with day in and day out. 200 days ago was June (red arrow) so unless the S&P plunges under 2450 that moving average line is still rising. In my estimation it shouldn’t matter that much now, similar to the plunge in August 2007. However, it would matter a few months from now because then we’re set to drop numbers closer in price to where we are now.

The general rule is the longer the S&P (or any index or stock) spends in a trading range and then breaks down from there, the more negative it is because that has given the long-term moving average line a chance to roll over — and rolling-over moving average lines are resistance on any rally.

 Related: Rumors of Tesla Bankruptcy Are No Joke – Here’s Why