This Historical Market Pattern Just Ended, and It Could Be a Precursor to a Market Crash

Given its volatility early in 2025, the market's move higher this year has been surprisingly smooth until recently. In fact, it had been a historically smooth pace. For 138 straight trading days, the S&P 500 (SNPINDEX: ^GSPC) had closed above its 50-day moving average until the streak ended on Nov. 17.

This was the longest such streak for the S&P 500 since a 149-trading-day period between 2006 and 2007 that ended in February 2007. It was also its fifth-longest stretch since 1950.

The S&P 500 wasn't the only major index to trade above its 50-day moving average during this stretch. The Nasdaq Composite (NASDAQINDEX: ^IXIC) also traded above its 50-day moving average over this period, with the dates overlapping with those of the S&P 500. Its streak was the longest since a 187-trading-day stretch that ended back in October 1995.

The end of such a streak can be a signal of short-term weakness, although the more important signal often is if the market can stay above its 200-day moving average. As of Nov. 24, the S&P 500's 200-day moving average was 6,166.05, so the market is still a good 8% above this mark. Meanwhile, about 54% of stocks within the index were also above their 200-day moving averages.

Image source: Getty Images.

What history says about this streak

The end of the S&P's streak is not necessarily a bad omen, as the index has typically seen positive returns both three and six months afterward when this has happened in the past. On some occasions, though, it has been a precursor to bear markets.

Back in 2007, when the S&P 500 broke its 50-day moving average streak, the market saw a short-term dip, but later continued its upward trend and hit a new all-time high later that year. It ended up closing the year with a 5.5% total return, including dividends.

However, October 2007 marked the start of a bear market that lasted till early March 2009. During this period, the S&P 500 lost more than half its value. So the S&P 500 breaking its 50-day moving average streak did not signal an immediate bear market, but it did foreshadow one about eight months later.

The end of another long streak back in 1961 also led to the start of a market decline. The next year, the market saw a flash crash and fell into bear market territory. These are the two prime examples of the S&P 500 falling below its 50-day moving average that eventually led to bear markets.

What should investors do?

At this point, the S&P 500 falling below its 50-day moving average after a long stretch of closing above it is just a yellow flag. There are two examples of it eventually leading to bear markets, but that has not always been the case.

As such, I don't think investors should panic, although they should probably pay a little more attention to the major market indices. Given the huge weight Nvidia, Apple, and Microsoft have in these indexes, they are also important to watch. If Nvidia falters, it's difficult to see the market not following its lead down.

Nvidia is the biggest beneficiary of artificial intelligence (AI) infrastructure spending, as its graphics processing units (GPUs) have become the backbone of AI data centers. Given how top-heavy with AI tech stocks this market is right now, if this spending falls, we're probably heading for a bear market.

Right now, that doesn't appear to be the case, but there are also a few cautionary signs, such as the circular financing deals Nvidia has struck with companies like OpenAI and Anthropic, where it invests in these companies, and they likely will use that cash to buy its chips.

That said, I think investors should stay the course and not try to time the market. Market timing is extremely tough, and often leads to investors waiting on the sidelines and missing out on big gains. In fact, a J.P. Morgan study found that if you missed out on the 10 best market days over the past 20 years, which usually happen after market downturns, your returns would be about cut nearly in half.

Instead, I'd look to continue to dollar-cost average into the market. I think index exchange-traded funds (ETFs), such as the Vanguard S&P 500 ETF (NYSEMKT: VOO) or the Invesco QQQ Trust (NASDAQ: QQQ), which tracks the Nasdaq-100, are great investments with which to implement this strategy. The market has always gone up over time, so even if it does fall into bear territory, this will just help set you up for the next bull market at better prices.

Geoffrey Seiler has positions in Invesco QQQ Trust and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.