Despite this year’s 25% decline in the S&P 500, the almost 10-year-old secular bull market remains intact, Bank of America said in a note on Monday.
The bank said that the S&P 500 just passed a crucial test after it bounced off of its 200-week moving average. That’s a level that has proven to be a “stress test level” for prior cyclical bear markets that occurred during longer-term bull market runs.
“The five prior cyclical bear markets of 20% or more during secular bull markets ending in October 1957, June 1962, August 1982, December 1987 and March 2020 saw the S&P 500 test, undercut or spend some time below its rising 200-week moving average,” BofA’s Stephen Suttmeier said.
The surging 200-week moving average also reached the bottom during the S&P 500’s December 2018 plunge of just under 20%. The S&P 500’s 200-week moving average currently sits at 3,605.
However, the index now has a more critical test ahead of itself to confirm that the cyclical bear market will eventually end and make way for a continuation of the current secular bull market, according to the note.
