Despite the criticism for lagging signals and whipsaws, the humble moving average is still a valuable tool for gauging the broad market trend. The 200-day SMA is probably the most widely used moving average, and the S&P 500 is the most widely used benchmark for the U.S. stock market. Taken together, the 200-day SMA and S&P 500 can be used to assess the broad market trend.
Extrapolating from these ideas, I am going to apply the 40-week SMA to the S&P 500 and the S&P 500 Equal-Weight Index. The 40-week SMA is roughly equivalent to the 200-day SMA, while the S&P 500 Equal-Weight Index reflects the "average" stock in the S&P 500, which is weighted by market-cap. Note that 52 stocks in the S&P 500 have a market cap above $100 billion, while 73 have a market cap less than $10 billion.
With two indexes, we can confirm signals and, hopefully, reduce whipsaws. Keep in mind that moving averages are trend-following indicators and will always lag. The chart below shows weekly bars over the last five years. There were two whipsaws (October 2014 and March 2018). Both indexes broke their 40-week SMAs in early August 2015 and this timely signal avoided the decline into January 2016.
Both indexes broke below their 40-week SMAs with a sharp decline in October. The S&P 500 moved back above with a bounce into early November, but the S&P 500 Equal-Weight Index fell short. Both are currently below their 40-week SMAs, but it would not take much to push them back above these key levels.
Combining moving average levels with recent highs, I would look for the S&P 500 to close above 2820 and the S&P 500 Equal-Weight Index to close above 4200. Such moves would show follow through to the recent bounces and argue for a reassessment of the current downtrends.