This is a crudely drawn chart using data avaiable from the S&P website. Essentially I'm showing the monthly ending index value, the trailing 12 month simple moving average and the spread between the two. Several points are intuitively obvious - the index is persistently above its SMA in positive trending markets and persistently below it in negative trending markets. This snapshot captures three recessions, 90-91, 00-01 (also Internet/Tech bubble and burst) and now.
Note that during the post Internet/00-01 recession, the index was below the SMA line for 2 full years yet the spread was never as wide as it was at the end of 2008. The 90-91 recession barely registers. I'll be watching this relationship closely over the next several weeks/months. I expect that it will serve as a confirmation of the end of the trough rather than as a leading signal of a bottom (that could have already happened at 666 in March). I can't rely on technical analysis alone but as fundamentals and sentiment improve this will be a valuable input.
