Get 100% ad-free experienceS&P 500 Holds ‘Above the Mendoza Line’—Why Bulls Still Control the TapeView all comments (0)0The phrase “above the Mendoza Line” comes from baseball, where a batting average below .200 is considered very poor. In investing, the 200-day moving average serves a similar role as a performance benchmark. When the market is trading above this level, conditions are generally considered favorable. When it drops below, it is widely viewed as a bearish signal that suggests market weakness may lie ahead.Last month, we noted that the S&P 500 had broken out of a significant correction and had begun forming a new uptrend. At that time, the index was sitting just below the 200-day moving average, and we pointed out that a move above this key level would be an important bullish signal. Over the past month, the index moved decisively above that average and has since traded in a narrow range just above it.Chart ExplanationThe chart below shows the S&P 500® ETF Trust (NYSE:SPY) year-to-date. It includes the February-to-April correction and the full recovery since then. In May, we highlighted a series of bullish signals, including a strong one-day 9.5% rally, a breakout above the downtrend line, and a shift in price structure with higher highs and higher lows. The index also reclaimed key short-term moving averages that had previously acted as resistance. Those key short-term moving averages are now acting as support, which is a bullish short-term characteristic.Current Market OutlookWe’re now focused on two key moving averages:The 20-day exponential moving average is currently serving as short-term support. The index remains above this rising level, and as long as it holds, we would view short-term momentum as strong. A move below it would suggest weakening short-term momentum. While not a major negative development on its own, it would be something to monitor closely.The 200-day simple moving average is the longer-term support level we are watching. With the S&P 500 holding roughly 2% above this level, market conditions remain constructive. A break below this average would be longer-term bearish and suggest the odds of a more serious correction are elevated.As long as the index stays above these two moving averages, we currently view the market as being in a healthy uptrend.Current Account UpdateThe equity portion of our models is currently only partially invested. This positioning is largely the result of short-term adjustments, including the sale of certain holdings ahead of earnings and raising some cash in anticipation of new opportunities. I’m closely watching several stocks that are nearing strategic entry points, and I intend to redeploy capital as those setups develop.As noted earlier, my outlook remains bullish as long as the S&P 500 stays above the key moving averages we’re tracking. If conditions weaken and the index breaks below those levels, I will shift to a more defensive allocation to protect capital.S&P 500 Holds ‘Above the Mendoza Line’—Why Bulls Still Control the TapeView all comments (0)0Latest commentsLoading next article…Install Our AppScan QR code to install appRisk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. 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