The 200-Week Moving Average Is The Only Technical Indicator I’m Watching Right Now

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Greece seems like it’s doomed to default on some of its debts.  And the problems are in danger of spreading to Italy, Spain, Portugal, and Ireland.

If European leaders don’t find a solution soon, we could see a sovereign debt crisis so severe we’ll be wishing for the good ol’ days of the 2008 financial crisis.

Not surprisingly, stocks are down and volatility is up.

The S&P 500 is down about 15% since July 7th.  And the VIX, a measure of volatility, is up more than 140%!

Clearly, investors are afraid and bearish on stocks right now.

Now, one technical indicator I’m following could put the final nail in the stock markets' coffin… and officially send us into a new bear market.

You see, the S&P 500 is in danger of falling below its 200-week moving average.

Take a look at the chart below…

You’ll see the S&P 500 has only fallen below the 200-week moving average two times in the last twenty years.  And both times it marked the beginning of a new bear market.


It happened in March of 2001 and again in June of 2008.

Consider this…

From March 2001 to July 2002, the S&P 500 went on to fall another gut wrenching 30% from 1,150 to 800.  And from June 2008 to March 2009, the large cap index fell an eye-popping 45% from 1,270 to 666.

As you can see, the 200-week moving average is a key technical support zone.  If this level doesn’t hold… the S&P 500 is likely to fall another 30% to 45%.  That would knock another 340 to 500 points off the S&P 500.

Here’s what you need to do…

If the S&P 500 closes below the 200-week moving average at 1,144 this week, it’s a big red flag.  But it’s not the death knell for stocks.  You’ll need to keep a close eye on the index next week too.

If it stays below the 200-week moving average for an entire week, it’s a good bet we’re in a new bear market.

But don’t jump the gun… If the S&P 500 can rally above 1,144 next week, there’s still hope we’ll avoid falling into a bear market.

Here’s the bottom line…

The S&P 500 has only fallen below its 200-week moving average twice in the last twenty years.  And both times the S&P 500 declined more than 30% in vicious bear markets.

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