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Why the S&P 500 is About to Roll Over

The S&P 500 finished this week at 2,092.83 and is up 7.85% over the last twelve months from a level of 1,940.46 one year ago. In NIA’s opinion, the S&P 500’s rally has been running out of steam – and it will soon roll over and decline dramatically to the downside.

Currently, only 59.4% of S&P 500 stocks are trading above their 200-day moving average – the least since October 23, 2014. Despite the S&P 500 rising 7.85% over the last twelve months – one year ago, 85.6% of S&P 500 companies were trading above their 200-day moving average. The S&P 500 has increased by 152.37 points vs. the percentage of its companies above their 200-day moving average simultaneously declining by 2,620 basis points. This means the S&P 500’s rally is being driven by fewer and fewer companies – with many S&P 500 stocks already beginning to roll over and decline.

NIA has created a special exclusive chart comparing the S&P 500 vs. the % of S&P 500 stocks trading above their 200-day moving average, over the last 25 months. Throughout the time period of May 1, 2013 through June 5, 2015 – the S&P 500 has remained in a solid uptrend vs. the % of its stocks above their 200-day moving average remaining in an equally solid downtrend – with it dipping to lower lows and continuously making weaker bounces to lower highs!

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So far in 2015, the percentage of S&P 500 stocks above their 200-day moving average has failed to return to its trailing 25 month median of 80.20%. Six months have gone by since it was last at its trailing 25 month median of 80.20%. It now seems unlikely to return. Its next move will likely be to below 50%, where it dipped once in October, but only for a period of 7 trading days. If it falls to less than 50% and remains there for at least two straight weeks – look for it to trigger the S&P 500’s roll over!

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