- The S&P 500 just flashed a bullish signal that suggests the bear market is over, according to Anthony Scaramucci.
- Recent strength in the stock market has helped the S&P 500 trade above its 200-day moving average for more than 18 days.
- Prior instances of such strength have led to a continued uptrend, based on historical data.
That signal is the fact that the S&P 500 has traded above its 200-day moving average for 18 consecutive trading days. As long as the S&P 500 closes above 3,977 on Friday, it will hit 20 consecutive trading sessions above the closely followed technical level.
“The S&P 500 closed today [Wednesday] at 4147.6, above its 200-day moving average for the 18th session in a row… No prior S&P 500 bear market in history has made a new low after making 18 consecutive closes above its 200-day average,” Scaramucci tweeted.
According to a historical data analysis by SentimentTrader, Scaramucci is spot on.
Looking at the S&P 500 since 1950, SentimentTrader applied the following parameters: that the index experienced a more than 20% decline (to represent that it was in a bear market), and that the index then went on to trade above its 200-day moving average for 18 consecutive days.
Of the 11 instances where this scenario has happened, here’s what happened next:
- The S&P 500 traded higher three, six, and 12 months later 100% of the time, with a median gain of 6.3%, 11.1%, and 19.9%, respectively.
- The S&P 500 traded higher one and two months later 91% and 82% of the time, respectively.
- The S&P 500 never went on to make new lows, or even test its bear market low. In other words, the index has, historically, never looked back after such a signal was triggered.
The thee prior times the S&P 500 generated this bullish signal was July 2020, August 2009, and May 2003, all dates that ultimately proved to be a good time to buy stocks.
Of course, this time could be different as investors fear high inflation, rising interest rates, and a potential recession. But history suggests the worst of the weakness seen in the stock market over the past year might be over.