An interesting stock market pattern suggests the market will be moving higher, but it doesn’t tell the entire story. | Source: AP Photo/Richard Drew
By CCN Markets: The S&P 500 is showing an intriguing pattern of behavior. May 30 was the ninth consecutive day that the stock market index closed above the 200-day moving average but below the 50- day moving average.
This one is both a) utter fucking nonsense and b) incredible.
If $SPX closes today between 2800 and 2945, it will be the 9th straight day of closing ABOVE the 200d but BELOW the 50d moving avgs.
Wait til you see the 1y returns since Jan 1 ’90 following such an event. pic.twitter.com/tMiXwDrYbi
— OddStats (@OddStats) August 21, 2019
In the 30 or so instances in which this has happened over the past 30 years, the S&P 500 showed a positive one-year return that ranged between 2.4 percent and 46 percent, with but one exception in 2007.
Stock Market Patterns Don’t Always Mean Anything
Ed Butowsky, Managing Partner at Chapwood Capital Investment Management, tells CCN:
“Stock market charts can show you just about any pattern if you look hard enough. While some of these patterns are simply coincidental, others exist for a reason. Most of the time, these patterns are not useful. That’s because, if you are a long-term investor with a diversified portfolio, patterns shouldn’t matter to you.”
If you are a trader, then patterns like these might be of some limited use.
What most people and investors miss about stock market patterns is that they can be reflective of stock market psychology.