S&P Rebounds As 200-Day Average Breach Serves As Turning Point
By Callie Bost
What broke the U.S. stock market?s back nine months ago proved to be its springboard on Tuesday.
The Standard & Poor?s 500 Index reversed a loss of as much as 1.2 percent to close higher by 0.6 percent, capping the biggest intraday reversal in almost four months. The rebound began after the index briefly fell below its average price in the last 200 days, a level monitored by technical analysts.
The benchmark gauge last sank under that level in October, when it finished below it for six straight days as U.S. stocks were in a 9.8 percent swoon. Traders barely flinched this time, recognizing it was mostly a function of the market?s recent stasis. While the S&P 500 has hardly budged from levels seen four months ago, the moving average has climbed about 55 points.
?When you have 200 days and each day you have a higher number, mathematically it?s going to move into the current spot you?re at when you?ve done nothing in four months,? said JC O?Hara, the New York-based chief market technician at FBN Securities Inc. ?It?s literally just a function of mathematics.?
The S&P 500 fell as low as 2,044.02 Tuesday, before erasing the losses within two hours. It rose as high as 2,083.74, a swing of nearly 40 points that marks the biggest reversal since March 18. The index closed at 2,081.34, 26 points above its 200-day average of 2,055.44.