Moving Averages May Tame SP 500 Decline
With the information we currently have in hand, we would expect any corrective activity in stocks to look more like 2009 than 2010. The rally off the March 2009 lows followed a very significant correction (a bear market). The current rally has followed two significant corrections in 2010 (Jan-Feb and Apr-July). If this hypothesis plays out in the real world, it is helpful to know what a "typical" correction looked like in 2009.
2009 Shown Below:
If the 40, 50, and 75-day moving averages remain important during any corrections in Q4 2010, current market weakness could subside near 1,182, 1,173, or 1,144.
2010 Shown Below: