Nothing Good Happens Below the 200 Day Moving Average
Nothing Good Happens Below the 200 Day Moving Average
ELI5/TLDR
The S&P 500 has been sitting below its 200-day moving average for about three weeks, which historically means trouble. A veteran portfolio manager walks through what happened in 2001, 2008, and 2022 to show that sharp rallies during downtrends tend to be traps, not turning points. His advice: stay heavy in cash and energy stocks, favor the US dollar, and don’t buy back in until the S&P climbs above that 200-day line and stays there for more than three weeks.
The Full Story
The 200-Day Rule and Why It Matters
Keith Richards, president and chief portfolio manager at ValueTrend Wealth Management, opens with a 100-year chart of the Dow Jones. The point is simple: markets go up over long stretches, but they also go flat for years at a time. These sideways consolidation periods are a normal feature of market history, not anomalies. And we have not had one in a while.
The 200-day moving average is a line on a chart that shows the average closing price of the last 200 trading days. Think of it as the market’s long-term mood. When prices are above it, the mood is generally positive. When they drop below it, the mood has shifted.
Richards uses a specific rule to avoid getting faked out by brief spikes above or below this line: the price has to stay on one side for a minimum of three days, ideally up to three weeks, before he treats the move as real. As of recording, the S&P 500 has been below its 200-day for roughly three weeks. By his framework, the trend is now officially broken.
His downside target sits around 6,200 on the S&P — the area where resistance appeared in late 2024 and early 2025, just before the tariff announcements. If that level breaks, he says, you are looking at something more like a genuine bear market with a sustained pattern of lower highs and lower lows.
The Snapback Trap
This is the core of the video. Richards walks through three historical bear markets — 2001, 2008, and 2022 — and the pattern is the same each time: sharp rallies that look like recoveries but turn out to be dead cat bounces.
“The snapbacks often trick people because the market has been through the bull market in buy mode. They are taught to buy the dips. Well, suddenly that changes but it takes a little while for that psychology to change, especially in retail investors.”
In 2022, the 200-day was broken around April, and the market never managed to stay above it for more than a few days until the bear market ended. Same story in 2001 and 2008. The market fell about 50% during the 2008 crash, peppered with rallies that convinced people the worst was over. It was not.
Richards is careful to say he is not predicting a bear market. He is preparing for one. The distinction matters. Last week’s rally could be the start of a real recovery, or it could be another snapback that fools people into buying at the wrong time.
The 2022 Parallel: Oil, Yields, and Stocks
Richards draws a comparison between current conditions and early 2022. Back then, oil prices were surging, US Treasury yields were climbing, and the S&P 500 was selling off. That same combination is appearing now: rising oil (driven partly by the Iran conflict), rising yields, and a falling stock market.
He is not saying history will repeat exactly. He is saying the ingredients look familiar. If oil and yields keep rising, expect continued pressure on equities.
Where to Hide: TSX, Energy, US Dollar, and Cash
The TSX has been outperforming the S&P 500 since early 2025, mostly because the Canadian index is heavy on energy stocks, and energy has been the strongest sector. On a relative rotation graph — a chart that plots both momentum and relative strength against the S&P 500 — commodities sit alone at the top. Everything else, including Bitcoin, is underperforming.
“Bitcoin has not been a protective asset in this environment.”
Richards favors US dollar exposure, noting that Canada’s economy is in rough shape independent of tariffs and geopolitics:
“Our deficit is the highest in Canadian history. Government spending as a share of GDP is the highest in 30 years. We have the only shrinking economy in the G7 and the second highest unemployment and the highest food inflation and housing inflation.”
He is not saying the Canadian stock market will do badly — oil stocks can still perform — but the underlying economy favors the US dollar over the Canadian dollar on a relative basis. His firm has been tilting toward US-listed stocks partly for this currency advantage.
The Current Playbook
ValueTrend is holding 30% cash in their equity platform and 40% in their aggressive platform. That is a lot of dry powder. Richards frames it as cheap insurance: yes, you miss some upside if the market rallies, but you are protected if it does not, and you have cash to deploy at better prices.
His checklist before buying back in: the S&P 500 must break above its 200-day moving average and stay there for more than three weeks. Not three days. Three weeks. Until that happens, the posture is defensive — cash, short-term US treasuries, and energy stocks.
Claude’s Take
Richards is a technical analyst with nearly 40 years of experience, and it shows in both the strengths and limitations of this video. His historical pattern recognition is solid. The 200-day moving average as a trend filter is one of the most studied indicators in finance, and the “three-week confirmation” rule is a sensible way to avoid whipsaws. His walk through the 2001, 2008, and 2022 bear markets is genuinely useful for anyone who has only invested during the post-2009 bull run and has never watched a snapback rally turn into another leg down.
The 2022 parallel — oil up, yields up, stocks down — is an interesting observation, but worth noting that two data points do not make a pattern. Correlation between those three variables in two periods separated by four years could easily be coincidental. Oil was rising in 2022 because of the Russia-Ukraine invasion; it is rising now because of Iran tensions. The underlying drivers are different even if the chart patterns rhyme.
The Canada analysis is the weakest part. Richards rattles off deficit figures and GDP stats to argue for US dollar exposure, but does not mention that these same fundamentals have been in place for years without the Canadian dollar collapsing. Macro fundamentals and currency movements have a notoriously loose relationship over short and medium timeframes.
The strongest claim in the video is also the simplest: holding significant cash during uncertain markets is not a bad idea. The opportunity cost of sitting in cash while the market rallies 5% is real but manageable. The cost of being fully invested while the market drops 20% is much harder to recover from. That asymmetry is the actual argument here, and it is a sound one.
One thing to keep in mind: Richards runs a wealth management firm. His content naturally serves as marketing for his services, books, and trading course. That does not invalidate his analysis, but the incentive to sound authoritative and slightly bearish — bearish enough to justify active management fees — is always present.