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S&P 500 THREATENS 400-DAY MOVING AVERAGE

Chip Anderson

Chip Anderson

President, StockCharts.com

During the August market drop, I wrote about the importance of the 400-day moving average as a major support line. [That line is gotten by converting the 20-month moving average to a daily line. I'll show why we use that line shortly]. The daily bars in Chart 1 show the August and November price declines bouncing off that long term support line. The chart also shows, however, the S&P 500 closing below that support line today. [That's the first Friday close below that line in five years]. The 400-day line also resembles a "neckline" drawn below the August/November lows. That's another reason why today's breakdown could have bearish implications for the S&P 500 and the market as a whole. A close below the November intra-day low at 1406 would be further confirmation of today's moving average violation. Chart 2 shows why the 400-day line is important.

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More