I define an uptrend as when the 50-day moving average is above the 200-day moving average.
It's a simple and straightforward approach.
Here’s the chart:
(right-click and open image in new tab to zoom in)
Let's break down what the chart shows:
The blue line in the top panel shows the price of the S&P 500 index.
The black line at the bottom represents the number of S&P 500 sectors with a 50-day moving average greater than its 200-day moving average.
The Takeaway: In a healthy bull market, both the 50-day and 200-day moving averages typically move in the same direction, with the 50-day moving average positioned above the 200-day moving average.
This week, the energy sector signaled a golden crossover (when the 50-day average crosses above the 200-day average). This development has brought all 11 S&P 500 sectors back into uptrend mode. Signaling a continuation of the healthy participation environment we have seen for most of 2024.
Typically, when all 11 sectors are in an uptrend, the overall index tends to perform well.
Is this the type of environment in which we want to allocate capital or not?
