The Samp;P 500 just broke below its moving averages. Here's why that matters.

Last week, I wrote about AIM breaking below its moving averages and what that meant for UK small-cap investors. Now it's happened to the world's most followed equity index - the Samp;P 500.  This holds even more significant ramifications for global investors.
The 200-day moving average is the line in the sand that almost all trend followers and institutional investors watch. When the Samp;P crosses below it, the character of the market changes. As Paul Tudor Jones, the great hedge fund manager, once said “nothing good happens below the 200 day moving average”.  So this weekend, I decided to analyse 56 years of Samp;P 500 history to quantify exactly what we’re facing.
Two very different markets
The Samp;P 500 has returned +8.1% annualised since 1970, which is an impressive record. But within that number lie two very different regimes.

Regime % of Time
Annualised Return
Volatility


Above 200d MA 72% +9.7% 13.1%


Below 200d MA 28% +4.1% 25.0%


Buy amp; Hold 100% +8.1% 17.3%

When the price of the index moves below its 200 day moving average, the numbers are stark. Admittedly, the performance difference between bullish and bearish regimes isn't as dramatic as AIM's 43 percentage points - the Samp;P 500 being a far superior collection of companies. But a 5.6% spread over half a century is certainly not...