Assuming that the S&P 500 reaches 1260 or less tomorrow on 1/22/08, the S&P 500 would be nearly 5 standard deviations below its 200 day moving average. No other events come close: July 23, 2002 S&P at 4.26 SD below its 200 day MA Sept 21, 2001 S&P at 3.43 SD below its 200 day MA Oct 19, 1987 S&P at 3.64 SD below its 200 day MA This time may be different but it would difficult to see the S&P 500 maintaining a distance of 5 standard deviations below its 200 day moving average for a prolonged period of time.
If it stays down the 200 day MA will turn down as well and it wil no longer be 5 std dev above the market.
What you say is true. However, in the cases shown above, the gap between the S&P 500 and its 200 day moving average narrowed more as a consequence of the S&P 500 rallying strongly than the 200 day moving average moving lower.
Using Yahoo data for ^SPX, that index closed at 224.84 on Oct 19, 1987. The 200 day standard deviation of daily price changes is a bit over 5 points (including the 19th, or a bit over 3 points if you exclude it). The 200 day moving average of the close on that day is about 298, so the gap is around 73 points. That's around 14 standard deviations (or closer to 24 if you use the standard deviation exluding the 19th). Either way, it is *way* more than 3 or 4 standard deviations. The index fell over 20% that day.