ETFs have crushed Wall Street's go-to stock-market indicator
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The S&P 500's 200-day moving average is no longer a reliable indicator of bear markets due to its widespread use. When too many investors follow the same strategy, it stops working, as seen in the early 1990s when broad-market index exchange-traded funds became popular.
The S&P 500's 200-day moving average has stopped being a reliable bear-market signal. This is because too many investors started using it as a market-timing indicator. Historically, the strategy of switching between the stock market and cash according to the 200-day moving average was successful, but it stopped working in the early 1990s. This was due to the introduction of broad-market index exchange-traded funds, which made it easy and cheap for investors to follow the strategy. As a result, the strategy's effectiveness was neutralized. The S&P 500 dropping below its 200-day moving average no longer has significant implications for the market's future direction.
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