Monday's trading session brought worrisomedevelopments for stock investors after the S&P 500 and Nasdaq Composite
closed below their 50-day moving averages.
Monday's selloff in U.S. stocks wasaccompanied by a troubling development that could signal more selling pressure
on the way.
The S&P 500 SPX and Nasdaq CompositeCOMP closed at their lowest levels in a month and below their 50-day moving
averages, according to Dow Jones Market Data. The S&P 500 fell 61.70
points, or 0.9%, to finish at 6,672.41, which was below its preliminary 50-day
moving average of 6,708.39. The Nasdaq Composite dropped 192.51 points, or
0.8%, to end at 22,708.07, which was below its preliminary 50-day moving
average of 22,855.22.
Even more worrisome, both the S&P 500and Nasdaq Composite ended below those averages for the first time in many
years. For the moment, though, the current selloff in equities appeared to be
letting some froth out of the market without endangering the three-year bull
run in stocks, according to Sam Stovall, the Pennsylvania-based chief
investment strategist for CFRA Research.
The S&P 500 had consistently closedabove its 50-day moving average from May 1 through last Friday - marking 138
consecutive trading days. But on Monday, the index snapped its longest stretch
above this average since the 149-trading-day period that ended on Feb. 26,
2007.
The S&P 500 ended below its 50-daymoving average on Monday.
Like the S&P 500, the Nasdaq hadconsistently closed above its 50-day moving average from May 1, 2025, through
last Friday's session - marking 138 consecutive trading days. But on Monday, it
snapped its longest stretch above the 50-day moving average since the 187
trading days that ended on Oct. 2, 1995.
"When the price of a stock or indexbreaks below its 50-day moving average, it's an indication of near-term
weakness that implies the potential for further weakness," Stovall said
via phone on Monday. In addition, "it signals the potential to fall below
the 200-day moving average, which would imply a longer-term and deeper decline
overall."
At that point, "people would begin toworry that we could see a correction or a bear market," the strategist
said.
Importantly, retail investors in the pastfew weeks have been de-risking their books, said Adam Turnquist, chief
technical strategist at LPL Financial. In addition, dip buyers have taken a
pause and weren't showing up as the S&P 500 fell below its 50-day moving
average.
"That's what we've been watching forand waiting for," Turnquist told MarketWatch.
Finally, the rotation under the surface ofthe stock market also has gotten defensive, as shown by the recent rally in
healthcare and energy stocks.
"I would call that early signs of acharacter change of this seven-month rally," he said, referring to the
powerful rally since the April lows that followed President Donald Trump's
tariff announcements.