The S&P 500 Just Fell Past Its 50-Day Moving Average. There Could Be Trouble Ahead. -- Barrons.com
9/18/20, 3:56 PM
U.S. stocks just posted their third consecutive weekly decline, and the S&P 500 just closed below its 50-day moving average for the first time since April.
That may not be a great sign, as those types of moves are "yet further confirmation that the corrective process is ongoing" in stocks, wrote John Kolovos, chief technical strategist at Macro Risk Advisors, in a Sept. 18 note.
The S&P 500 wasn't the only index to fall below that technical level on Friday. The Nasdaq 100 fell below its 50-day moving average as well, for the first time in more than four months, according to Kolovos. He writes that the initial stages of the dot-com bust were marked by the Nasdaq 100 falling below its 50-day moving average.
Even so, a near-term rebound could be on its way, as "actual support levels are coming into play on the index as well as on the stock level," he writes.
When it comes to stock-market fundamentals, some others on Wall Street are hearing echoes of the dot-com bubble as well. Strategists from Barclays said in a Sept. 17 note that "measures of equity valuations are now at 2000 dot-com bubble levels."
Stocks "appear to be pricing in an ideal scenario where there will an extremely strong cyclical recovery driven by a vaccine, the market shares gains from the 'Resilient' (large cap tech) stocks will accelerate, and US presidential elections will not pose a significant headwind to risky assets," they wrote.
Thanks to those pricey valuations, the strategists downgraded their recommendation on a group of large-cap tech stocks they call FANMAG: Facebook (ticker: FB), Amazon.com (AMZN), Netflix (NFLX), Microsoft (MSFT), Apple (AAPL) and Google parent Alphabet (GOOGL). The bank now has a Market-weight recommendation on the group, the equivalent of Hold, down from Overweight, or Buy.
But only four of those stocks underperformed the 1.1% decline posted Friday by both the Nasdaq Composite and the S&P 500: Microsoft slipped 1.2%, Amazon fell 1.8%, Alphabet declined 2.4%, and Apple dropped 3.2%.
