I have read a lot the last few weeks about how long we have been above the 200 day moving average and what this means to the markets. There are some great traders I follow on StockTwits like Ryan Detrick (@RyanDetrick) and Howard Lindzon (@howardlindzon) bringing these points up; so of course I had to look at it myself in the context of where I believe we are in the overall structure of the markets. In my opinion one of the most important things to consider in trading and analysis is context. However, my way of researching this is not as scientific as others, it is visual. I just started looking at my long term S&P 500 chart and worked my way back to where my chart ended. and in this case it happened to be 1980. I used a log chart because percentage gains is really what we are interested in right?
Since I think we are on the verge of a new secular bull market, I think starting back in the early 80’s is great context and the 1984-1987 time frame stuck out to me as being the best comparison. Now, I know, this didn’t end well in the 1987 portion, and it may not again in, but still the best comparison for me. Look what I found.
Beside a handful of days, the $SPX remained above the 200sma for this entire period. This got me to thinking. This is a strong trend that lasted for many years, so does it matter what day or month the retrace was? or even how many times it touches in the move? Doesn’t to me, seems like semantics. I am sure we will take a trip back there at some point, but this is but one data point to consider and weigh appropriately along with the many positives we are currently seeing. Basically be sure to step back and consider the bigger picture as well.
For those that are adding how far we are above the 200sma to the argument, don’t forget the moving average can play catch up just as price can fall; and the longer we stay above the moving average the more it will accelerate. It is Likely the next touch will be some reasonable combination of the two.
It is also worth noting that the mid to late 1990’s move was the biggest and longest sustained move with minimal detours below the 200sma, but I certainly wouldn’t say we are there yet if this does turn out to be the new secular bull.
Good Luck! it is there for the making!