What a difference a day makes.
After trading below its 200-day moving average for about two weeks, and trading below its 50-day moving average for more than a month, the S&P 500 leapt back above both critical trend lines on Wednesday as a cease-fire deal between the U.S. and Iran helped lift investors’ spirits.
The index first closed below its 50-day moving average on Feb. 27, remaining below it for 27 sessions. It broke below its 200-day moving average on March 19, spending 13 trading days below it, according to Dow Jones Market Data.
The S&P 500 breaking back above both trend lines will likely be interpreted as a bullish development by technical analysts. J.C. Parets, a market technician and founder of TrendLabs, said in Wednesday commentary that it suggested a bear market for stocks has been cancelled.
“It’s a bull market. That’s the backdrop,” Parets said
But forward returns, generally speaking, have been more mixed: Three months later, the index has been positive less than 50% of the time. And while returns six months and one year later have generally been strong, they have lagged the returns during all periods since 1953.
“With all of this in mind, we would highlight that six-month and one-year performance following these instances has generally been positive since the 1990s,” the Bespoke team said in a note.
U.S. stocks finished sharply higher on Wednesday, with the S&P 500 up 2.5% at 6,782.81. The Nasdaq Composite rose 2.8% to 22,635, while the Dow Jones Industrial Average gained 1,325.46 points, or 2.9%, to 47,909.92, FactSet data showed.