Much has been said, speculated about, recently regarding the 50 day moving average crossing below the 200 day moving average.   Speculation is what fuels the markets so why not speculate about that as well.  Just another day at the office, right.  Included here are some charts of the S&P thrown in to add a little spice to your morning, afternoon, or evening delight.

As you can see in this 1994-95 chart the 50 and 200 crossed and held for a time in 1994.  The market dips under the 500 day moving average end of year for approximately a month before it roars out of its trading range.   The 50 and 200 flirt with a brief decline but do not cross and hold lower.  Instead the 500 day MA is just underneath them both and acts as some support prior to the market running harder to the upside.  Important to add the 500 day MA to the mix of averages so you can see what other possible resistance or support areas may be nearby.

Here in this 1998-1999 chart of the S&P you can see the 50 and 200 crossing briefly with the 500 day moving average supporting the market.  From here the market moves up strongly.  Just a brief flirtation again with the 50 crossing the 200.  The backdrop of the market previous to this time frame is a strong market characterized by several months of consollidation in April - May followed by a quick run up to almost 1200 and then a quicker fall from favor.

As you can see in the chart above the 50 and 200 crossed with the 200 approaching the 500 day moving average.  The market has moved strongly under the 200 as we move forward on the chart and as the market rallies to the 500 it falls sharply from there.  This is a clear sign of a death cross and the market following suit.   The added burden of the 200 and 500 looking to cross gives indication of the cycle continuing lowerl.

In this 2004-2005 chart we see the 50 and 200 crossing occur again only to have the trend reversed late in the year.  The backdrop to this market is a bottom in 2003 with 2004 being up into Feb. and March.  From March until the final bottom in Oct. we see a market in a slowly degrading trading range with a high near 1160 to a low near 1065.  The crossing of the 50 and 200 here just created a consolidation period before running higher again.

In the above chart we see the Death cross occur with the 50, 200, and 500 day moving averages converging and crossing.  It is from this position that tremendous damage was done to the overall market averages.  The above chart is of the S&P Mid Cap index which was used for illustrative purposes.

In the above chart we have the 50 and 200 crossing and the 500 crossing the 200 at the top of the market in April.

If the history of the last 15 years or so indicates anything it is that the 50-200 day cross is not a particular harbinger of bad things to come.  It does give indication of changing momentum characteristics in the market and can indicate a pause, perhaps the one that refreshes, AAHH.

The 500 day moving average appears to lend significant support or resistance at times in its journey over and under the averages.  In 2001 when the 200 and 500 crossed each other above price, on the chart, the averages continued to move lower until 2003.  The market had already moved from a high of 1500 + change in 2000 to approx. 1300 when they converged in May of 2001.  From there the market moved lower until 2003 where we had 3 bottom pivots occur within 25 points or so of each other during July and August 2002 and the last one in March 2003.

In 2007-2008 when the 200 and 500 crossed above price on the charts it gave indication of continued lower prices.  This did prove to be accurate as prices continued to fall into 2009.  Moving averages being the lagging indicators they are only indicate bias over the long term.  It may suggest though that there are plenty of market participants though that carry a long term bias towards their investment practices.  We can know this, obviously, through mutual fund participation and other market participants that take long term positions in stocks.

In 1994-95 and in 1999 the 500 day moving average provided plenty of support to the market averages and price continued higher after intersecting with it.

In Nov. 2009 the 500 day moving average intersected with price at approximately 1110 on the S&P 500.  Shortly after intersecting the 500 day MA the market began to show signs of a change in character.  It moved higher briefly corrected lower and then moved higher once more into April when the market began to fall.  The market continued to fall and where it intersected the 500 once again  it formed a support level for the market.

We have seen on two occasions where the market rallied back up  or near the 500 day moving average only to find resistance and sell off further for an extended period of time.  The market would have to sell off considerably from here for it react back to the 500.   Currently the 500 serves as support for a market attempting to gain its footing.  The market has fallen under the current 200 day moving average.  The 200 day moving average was moving up from under price though and not as yet serving as resistance to current overhead activity.

The 200 and 500 day averages indicate a period of perhaps prolonged range bound activity here with a slightly negative bias.   Looking at a monthly chart indicates that price actions have been more corrective than consolidating.   The corrective phase during 2010 has been deeper and lasted longer than any period that occurred during the 2003-2007 rally.  The overall chart pattern though is currently weaker than the 2003-2007 period and I would expect it to remain that way for a while.

Here is to eating hats, crow, or corn rows if I am wrong.

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