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S&P 500 and Dow ETFs Test 50-Day Moving Average


Stocks were lower for the third straight day on Thursday with the S&P 500 and Dow Jones Industrial Average, along with related exchange traded funds, testing their short-term trend lines.

The SPDR S&P 500 (SPY) is down 2.4% over the past week and SPDR Dow Jones Industrial Average (DIA) is down 2.3%. Both ETFs are dipping toward their 50-day simple moving averages. SPY has gained 13.8% year-to-date and DIA has risen 15.4%.

The 50-day moving average has also provided support for the S&P 500 during brief pullbacks in February and April.

The Dow is currently at risk of breaking an 108-trading day streak of closes above its 50-day average, according to Bespoke Investment Group. The last one ended at 148 trading days on Feb. 27, 2007.

If the stock markets break through the short-term trend lines this time around, the long-term 200-day moving average could be next. SPY is currently 6.4% above its long-term trend line and DIA is 6.1% above the long-term trend.

The equities market retreated over the past two weeks, fueled by growing concerns that Federal Reserve will begin “tapering” its bond purchases. [VIX ETFs Rise Despite Higher Dow]

“Nervousness has definitely increased this week and most of the economic data has been a little worrisome,” Ryan Detrick, Cincinnati-based senior technical strategist with Schaeffer’s Investment Research, said in a report at TheStreet. “With the monthly jobs data coming out on Friday, concerns of Fed tapering and a slowing economy has created a sell first, ask questions later mentality.”

“You got this contrast in what the Fed should do, should they continue to pump the system full of liquidity or is it the time to pull back?” Bill Schultz, chief investment officer at McQueen Ball & Associates in Bethlehem, said in a Bloomberg article. “All those cross-currents throw some caution on the whole market. ”

Additionally, some investors are worried about another summer swoon after an impressive first five months to the year. [How Rising Rates Could Affect Stock ETFs]

“Given how far it’s run and where it can go from here, investors are taking a pause and a more look-and-see approach than they have in the past, where equities are the only place to be,” Schultz added.

SPDR S&P 500

SPDR Dow Jones Industrial Average

For more information on the broader markets, visit our S&P 500 category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.