It’s amazing how long equity markets can defend poor market breadth and divergences. But if you weren’t already aware, divergences and breadth conditions can persist longer than some trades (and traders) can remain solvent.
That said, market breadth is a useful sl0w-mo indicator, especially when the price action begins to stall. And stall it has. As Aaron Jackson mentioned in this week’s Rotation Report, “not much has changed in the markets over the past several weeks”. But that will only last for so long before it gives way to a bigger move. Here’s this from Mark Arbeter today:
— Mark Arbeter (@MarkArbeter) June 15, 2015
That said, should the stock market break lower, many active investors will point to deteriorating market breadth as the culprit. A sustained move higher (not out of the question) would likely require a breakout move that pauses to rebuild breadth and momentum.
Either way, here’s a look at some broad market breadth indicators all in one chart. The most prominent change from our last update comes with the turn lower in the Advance-Decline line on the NYSE and S&P 500. This could be a warning sign that stocks may see a delayed reaction to the downside in the weeks ahead. As well, the Bullish Percent Index is down to the low 60’s, its lowest reading since the late January lows. But, as Mark mentioned above, the market has refused to show its hand thus far. This reinforces why price discipline will be (and is) so important for traders.
Another interesting note from the chart above is that only 41 percent of stocks in the S&P 500 are above their 50 day moving average. That’s crazy to think about as the S&P 500 is still only 2.5 percent off its all-time highs. Thanks for reading.
The author does not have a position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.