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The S&P 500 generally performs well following weak market breadth conditions. The average returns increase gradually over time from 1.8% a week to 15.8% 12 months after fewer than 25% of S&P 500 constituents trade above the 50-day SMA, with at least 80% probability of gains recorded across all timeframes.
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The 6-month mark is the most consistent profitable window, with 100% positive returns in the past 10 instances, seeing an average gain of 10.6%.
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When fewer than 25% of S&P 500 constituents are above the 50-day SMA, the lowest breadth recorded on average is 14.8% below the 50-day SMA and 36.3% are below the long-term 200-day SMA. In terms of the maximum drawdown recorded in a year after less than 25% of S&P 500 constituents are above the 50-day SMA, the average is a further pullback of 8%.
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