The SPX’s 12 month moving average (MA) continues to exhibit a somewhat positive bias and slope as the green arrow in the chart below suggests.
This is in contrast to the position of the same MA as the beginning of the last two bear markets in 2000 and 2007 began with their initial ~10%-15% sell-offs, whereby the 12 month MA became negatively sloped, with prices remaining below that MA for the next two years.
This does not mean that the SPX can’t experience hard and fast sell-offs just because it has a positively sloped MA. The past two summers and their 20% sell-offs prove otherwise.
Further, the crash of 1987 occurred when the 12 month MA was positively sloped.
However, what should also be noted is that prices rebounded incredibly quickly in all three instances, in-line with the logic that those sell-offs were not congruent with market trend at the time.
Further, the market’s rally into its 1987 high was so large, fast, uninterrupted and seemingly unhealthy that one could, like PTJ did, have drawn parallels and analogs to the run-up into the 1929 highs, which exhibited similar euphoria, to conclude that a major sell-off was likely imminent despite that trend remained up.
Regardless, per the positive bias of the MA at this time, one would think that more and sustained downside in the SPX would need to occur to make us believe an imminent bear market was underway.
Our cycle work suggests that if the next phase of any sustained move lower is near, it likely needs to begin in earnest in the remainder of this or next week, otherwise the market could rally to test trend-line resistance (1) at ~1,575-1,600 very quickly.