Stock exchange traded funds have rallied sharply from the October low but the S&P 500 hasn’t been able to make a sustained push over its 200-day average, a closely watched technical indicator.
“The S&P 500 failed to break the 200-day and Italy’s debt yields really blew out, so you have a panicky reaction in the marketplace,” said Brian Barish of Cambiar Investors, in a Bloomberg report Thursday.
In early October, “the market was poised to rally on almost anything, and it did,” but the 200-day average is “where it ran out of gas,” Barish told Bloomberg. [S&P 500 ETFs’ Rally Over 200-Day Average Opens Door to Year-End Rally]
Stocks were recovering some of their losses Thursday after the previous session’s downdraft caused some to question the rally’s sustainability. [How Bounce Left in Stock ETFs?]
The 200-day moving average is “a longer-term, well-defined trend line” and the S&P 500’s failure to stay above it is “disappointing,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research, in the article.
However, some aren’t worried about the S&P 500 failing to break decisively through the 200-day average. [S&P 500 ETFs Testing 200-Day Average]
The iShares S&P 500 (NYSEArca: IVV) was down 0.7% year to date as of Nov. 9, according to Morningstar.
“It’s not unusual for markets to take out important resistance levels and come back and retest, almost like a fake- out, but then go on and re-challenge them again and ultimately break through on a second or third attempt,” John Kattar, chief investment officer at Eastern Investment Advisors, told Bloomberg. “The market has the potential to grind higher, to take out the 200-day moving average.”
iShares S&P 500 (NYSEArca: IVV)
