S&P Entering Thin Air?

Returns When S&P 500 Closes > +17.50% Above 3-year Moving Average

In essence, a robustly performing index typically maintains a position significantly above its long-term moving averages, contrasting with periods where it struggles to sustain gains. Many of our past posts on Subtack have highlighted milestones in momentum, suggesting further upside potential. However, it's crucial to note that our intention here isn't to insinuate an imminent danger for the SP500. Rather, we find ourselves in a less common territory, where we are entering thinner air.

Historical analysis indicates that when the SP500 closes more than 17.50% above its 2-year moving average, momentum tends to taper off in the short term. Therefore, while it has been undeniably challenging to bet against U.S. equities since the lows of October 2023, it may now be prudent to consider a period of consolidation.