stocks have lost shortterm upside momentum and now the market looks stuck in a longerterm downtrend with no end in sight many market strategists expect the s  p 500 will take aim at retesting the lows in the first quarter as earnings look weaker recession fears rise and the federal reserve keeps tightening policy strategists who watch charts have a similar outlook they are watching the s  p 500 as it trades below its 200day moving average after lifting above that threshold briefly the 200day is a closely watched momentum indicator reflecting the average of the past 200 closing prices of a security or index when the index breaks above it thats a positive momentum sign the s  p 500 surpassed the average on nov 30 and fell below it monday the 200day is now at 4040 for the broadmarket index and the s  p 500 closed at 393392 on wednesday a loss of shortterm momentum i think the real story is within the downturn were losing shortterm momentum the shortterm relief rally has seemingly lost its hold said katie stockton founder of fairlead strategies we all have different ways of measuring these things for me the downtrend is intact and just in part because it has a lower high stockton said her indicators showed the flip in the s  p 500 tuesday mike wilson morgan stanleys chief us equity strategist said he is positioning to stay out of the downdrafts way while the index has modestly exceeded its 200day moving average and the breadth continues to expand the downtrend from the beginning of the year remains in place wrote wilson this makes the riskreward of playing for more upside quite poor at this point and we are now sellers again wilson said his tactical range had been 4000 to 4150 and the s  p 500 traded into that range last week chris verrone head of the strategas technical and macro research team said he sees another test of the lows approaching he also does not expect the usual positive december seasonality to work as well this year if you enter december in a hole dont expect to get bailed out he said ive been unconvinced all year that we had that flush moment that you dont want to get out of bed moment i suspect thats still in front of us verrone said he expects the current top of the range would be 4200 to 4300 for the s  p 500 its hard to get below 3400 3500 he said i still think thats the low of the range and i would not be surprised if we saw it again theres something off right now and i think the banks are telling us that notable weakening in other corners of the market verrone said the banks started to underperform recently they know something and thats enough for me to move to the sidelines he said they lagged on the rally and now theyre going down more as the market declines somethings up there the market seems uncomfortable with something verrone also notes that bond yields have been lower in the past few days and still tech cant get a bid i think in markets like this ownership is your enemy where is there still the most ownership its in names like apple theres danger in safety he said fairleads stockton said she put a sell on financials wednesday she now is overweighting defensive sectors that are displaying relative strength that would be consumer staples health care and utilities indeed the s  p 500s financial sector is down 48 for december while consumer staples and utilities are off by more than 1 health care is lower by 04 for the month morgan stanley strategists are eyeing the same sectors as one final note in that regard we expect inflation to fall fast in 2023 while that decline will allow the fed to pause as early as january equity investors need to be careful what they wish for morgan stanleys wilson wrote he added that falling inflation is also part of a negative thesis which is behind his wellbelow consensus earnings forecasts