Intraday calculations on Thursday signified that over 95% of stocks in the S&P 500 traded above their ten-week moving averages, resulting in the highest reading for the TWSPX indicator ever. We take a look at returns for the S&P 500 with historically similar moves.
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Since broad domestic equity indices posted a bottom on March 23rd, they have not looked back. In fact, the S&P 500 SPX, Nasdaq Composite NASD, and Dow Jones Industrial Average DJIA have each rebounded with price returns in excess of 30% (data beginning 3/23/20 through 5/27/20). As a result of this upward movement a number of indicators on the Nasdaq Dorsey Wright research platform have turned positive, yet perhaps none more so than the ten-week for the S&P 500 TWSPX. As a refresher, TWSPX measures the percentage of stocks in the S&P 500 that are currently trading above their 10-week (50 day) moving average. With an intraday calculation of 95.64% on Thursday (5/28) TWSPX posted its highest reading ever, signifying that over 95% of securities in the S&P 500 are trading above their 10-week moving average. While this may sound ominous to some, the data suggests otherwise as we note generally positive returns following TWSPX movements above the 90% threshold, with almost all observations rolling positive within nine months.
In a similar vein, when first highlighted several weeks ago as a developing story, SPX managed to get 10% above its 50-day moving average yesterday (5/27). This event is also rare, only occurring six times since 1955 (April 2009, November 1998, February 1991, September 1982, January 1975, and July 1955). Respective performance for the S&P 500 (as perhaps anticipated at this point) is also positive, with all returns in the black six months out.
While the events surrounding TWSPX and the 50-day moving average for the S&P 500 are certainly promising, they are not a silver bullet nor a guarantee of the past repeating itself. It is also worth noticing that events like these are infrequent, resulting in a small sample size to build from. However, the findings here do evidence that demand continues to reenter the equity markets, positively contributing to the weight of the evidence.
