50 & 200 Day Moving Averages.

The S&P 500 trades significantly lower than it's 50 and 200 day moving averages. A moving average {hereafter MA} is simply the plotted sum of all prices divided by the period of time studied. In this case we are using 50 & 200 days of trading. As chronicled by Bespoke Investment Group both of these indices rarely trade at such significant discounts to either of these respective averages. With regard to the 50 day MA, four of its most oversold readings took place during the Great Depression. One occured soon after the 1987 crash and we are currently in the most current period. As of last night's close the S&P traded approximately 16% below it's 50 day MA and is 30% below it's 200 day MA. Traditionally trading at such discounts to these levels has led to a rally. Bespoke has calculated for instance that the average rally in the 50 day period after at least a 25% decline in the 50 day moving average has been approximately 25% and the mean has been 17%.

Source: Bespoke Investments, LLC, 10.24.08 & 10.27.08. http://www.bespokepremium.com/ (Subscription service)