Indices on 200-Day Moving Averages after Biggest 2-Day Decline in a Year

Equities Fall After Elections

Following the announcement of President Obama re-election, US equity markets recorded the biggest two-day decline since 1 November 2011 (almost exactly 1 year ago). S&P500 fell 3.56% in the two days combined. The job of Macroption is not to find out which of the hot topics contributed the most (the fiscal cliff, Europe, or Apple shares) – instead, let’s look at a few charts.


Intraday development of S&P500 in the last two weeks – the week of Sandy and the week of Obama.

S&P500 Closed below 200-Day Moving Average; Dow and NASDAQ Twice

Probably the most widely observed of all technical indicators, even by people who normally don’t “believe” in technical analysis, is the 200-day moving average, especially when the major equity indices are testing or crossing it, which is exactly what is happening in these days.


S&P500 has closed below 200-day MA on Thursday, for the first time since 3 June. In June it had closed below for 3 consecutive days and then it started a 4-month rally that lasted until September (this is not to imply that something similar must follow this time too, as external conditions are obviously different and one historical observation has little predicting power).

Dow Jones Industrial Average

The two other big indices have already closed below their 200-day moving averages for two consecutive days post-elections. Like S&P500, both the Dow (above) and NASDAQ Composite (below) had closed below their moving averages at the beginning of June before starting the rally (Dow 3x, NASDAQ only once).

NASDAQ Composite

Unlike S&P500 and the Dow, NASDAQ had been testing the moving average for several days before the post-election sell-off pushed it through.


Although equity indices were making new multi-month lows, the VIX (CBOE Volatility Index) increased only slightly and so far it has not exceeded the psychological level of 20. If you are worried about equities falling further and you are thinking about buying puts to protect your portfolio, you may find the current VIX level quite attractive (but keep in mind that VIX is implied volatility calculated across a wide range of calls and puts and implied volatility of individual options can be very different).

VIX (CBOE Volatility Index)

Intraday development of the VIX index in the last two weeks.

VIX (CBOE Volatility Index)

Compared to early June, when equity indices were also testing their 200-day moving averages, the VIX is about 8 points lower now.

VIX Futures Curve

Like spot VIX, the futures curve shifted upwards during the first day after the elections (Wednesday), but didn’t on the second (Thursday). Contango remains quite steep, but for example February 2013 VIX futures are just above 21, which might be a good price if you expect negative development in equities in the coming months.

VIX futures curve