Why This Indicator Is a Bullish Sign for the S&P 500

Michael A. Robinson

Morgan Stanley recently issued an alert saying that going long on the S&P 500 Index presented the best buying opportunity in 20 years.

To investors still caught up in the sky-is-falling talk that's been spewing out of the talking heads on cable, that might sound absurd.

But not to you.

That's because I've been keeping you on top of profit-making opportunities before Wall Street catches on. Specifically, I'm talking about the "big call" I made during our conversation on March 1.

In that report, I shared a chart that showed the market had hit bottom on Feb. 11. I also showed you how the S&P 500 had entered a healthy uptrend – and called for a breakout in stocks.

Since then, as Morgan Stanley's recent alert perfectly illustrates, Wall Street has jumped on the bandwagon. That's just where we like to be – ahead of the Street.

Today, I'm once again getting you out in front with a chart that shows you how the market has crossed another critical bullish threshold.

Very few people are talking about this yet.

And that makes this a big opportunity for you…

Ahead of the Game

Morgan Stanley's alert made headlines throughout the financial world because many investors were still worried the market remained in a downtrend.

You all weren't.

That's because we were way out in front of Morgan Stanley and the rest of the financial world.

In fact, since the market opened on the day of our technical-analysis talk, the S&P 500 has returned just over 6% for an annualized return of 72%.

This is why I tell investors like you that they should always have some money working in the market. Otherwise, you can miss a big uptrend just like the one I predicted.

Here's what I said at the time:

"In other words, the market is starting to trade in a healthy range, because more bulls are convinced we have upside steam after bargain hunting. By buying stocks at discounts, traders and investors have pushed the market back into what appears to be a solid rebound."

I also noted that the S&P 500 had traded above the baseline support of the 20-day moving average for 10 straight days, then its longest stretch in months.

Moreover, the chart I attached also showed the market had just moved above the universally watched 50-day moving average. I said that was another sign of bullish sentiment for stocks.

With that in mind, and to show you just how much better things have gotten in the last few weeks, I've prepared another chart to share with you today…

Take a look and you can see exactly what I'm talking about. Note the area I marked with a yellow arrow. It shows that the S&P 500 has now remained above the 50-day line for 15 straight sessions.

This is highly significant for two reasons. First, it represents billions of dollars changing hands over a period of roughly two-and-a-half months. That's a lot of hard-won empirical data that proves the bulls are back in the market in earnest.

Second, this is an average that nearly every professional trader in the world watches as a key sign of strong underlying support. Once it crosses this threshold, many pros begin to devote more cash to stocks because they're convinced the market is in a healthy uptrend.

If you take a look at the bottom portion of the chart, you'll see volume has generally remained higher on winning days than on losing ones. That's another sign of bullish momentum.

There's another big reason for optimism – and it has to do with a key signal of support the market has just revealed.

Take a look at the white arrow at the upper-right portion of the chart. It's pointing to the 200-day moving average and shows we've traded above that line for the three sessions ended Monday.

This is the moving average to which long-term investors pay the most attention. After all, we're talking about prices investors have been willing to pay over the past 40 weeks of trading.

For that reason, the 200-day average is considered a dividing line that shows when a market has regained its health. The longer we trade above that line, the better the long-term outlook.

To be sure, we've only been there for a handful of sessions. And I expect traders to test that line in the days ahead as they seek to take gains from this impressive rally.

When the market rebounds so quickly, we have to expect that.

But when it's all said and done, the market has pretty much rallied in line with what I forecast at the beginning of this month.

Moreover, the markets' reaction to yesterday's tragic terrorist attacks in Brussels underscores my point. The morning headlines made it sound like investors would panic-sell. Instead, the S&P 500 was around break-even. That's a pretty big vote of support for stocks.

I've been one of the few tech analysts who's repeatedly said the market was oversold earlier this year and that a rebound was at hand.

And that's pretty much how it's played out. With that in mind, I want to remind you not to panic when Wall Street turns dour.

As I've been showing you over the past few weeks, that's often when you find the best money-making opportunities.

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Michael A. Robinson

About the Author

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Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.

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