It halted the last two selloffs and came through again on Tuesday: the 200-day moving average.
Threatened with its longest drop since 2012, the Standard & Poor’s 500 Index turned on a dime in the first hour of trading after flirting with the chart level that’s come to represent its most reliable floor. The result was the biggest intraday rally since March, with the S&P 500 rising 1.4 percent.
While buying the dip is paying less in 2015 than at any time since the bull market began, investors are finding their nerve once the 200-day moving average comes in play. It’s unlikely to hold forever, according to Chris Verrone, partner and head of technical analysis at New York-based Strategas Research Partners.
“The market has made a habit of finding support at the 200-day, but under the surface there are signs that we should position carefully,” Verrone said by phone. “It would be wise to stay a little prudent as summer runs its course.”
The S&P 500 surged 1.2 percent to 2,093.25 at 4 p.m., avoiding a six-day slide that would have marked the index’s longest selloff since 2012. The gauge fell as low as 2,069.09, which was just 0.2 percent from the 200-day average, before extending gains as the day progressed. The index closed less than 0.1 percent from its 100-day average.
Sentiment had been souring in equities after last week’s run at the first record high since May fell flat. At the same time, drastic moves in either direction are making it harder to see that the U.S. stock market is running in place.
The S&P 500 has slid 0.7 percent since the start of June and is down 0.4 percent in the past month. The benchmark gauge is up just 1.7 percent for the year.
“This market has gone sideways all year, so the 200-day has caught up to where the price is,” Verrone said. “But there are signs that the market has narrowed. I’m a little reluctant to call the all-clear just yet.”
U.S. equities are being pushed along by the fewest stocks in more than 15 years, with more than 100 percent of the S&P 500’s gain this year attributable to just two sectors, health-care and retail. That’s the tightest clustering for an advancing year since at least 2000, Bloomberg data show.
Dwindling leadership hasn’t kept investors from buying at levels they view as depressed. Earlier this month, after the S&P 500 fell below its 200-day average on an intraday basis for four straight days, the index rebounded 2.4 percent over the following week.
When the benchmark gauge closed below the key 200-day level for six straight days in October, amid a 9.8 percent selloff, it bounced back 9.5 percent over the next month. The S&P 500 has closed below the level for just 18 days since the beginning of 2012, Bloomberg data show.
“It’s impressive to see the market hold the 200-day moving average,” Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. “It means there is still demand on pullbacks for U.S. stocks. But the trend right now is still sideways.”