Key Points
- Small Cap Technology Breaks Out
- Beginning To See a Build-Up of New Highs on the NYSE
- NYSE’s Advance/Decline Line Trades to Record Levels
- S&P 500 Breadth Is Strong Across the Board
- Small Caps Have Solid Participation as They Breakout
Chart in Focus
While the large technology stocks receive most of the attention, the S&P 600 Information Technology Index is quietly breaking out of the consolidation that has been in place since February. The index is above the rising 50-day moving average and has closed higher for three consecutive days. Above 1,300, the odds favor a continuation to the upside.
Relative to the S&P 500, Small Cap Technology has moved above the 50-day moving average. A break of the June peak sets the stage for an attack on the early 2021 highs.
NYSE Breadth
After a successful break and retest of the declining trend line, the NYSE’s Advance / Decline Line has moved to a new high. The indicator is above the 50-day moving average, which is turning higher and confirms the record highs for the S&P 500, which is trading above its 50-day moving average.
The NYSE’s Advance-Declining Volume Line has held near-term support above the rising 50-day moving average. Taking out the June highs is the next step that would further lend a breadth confirmation to the strength that we see in equity prices.
The 5-day moving averages of issues on the NYSE making new 52-week and six-month lows continue to trend lower, failing to produce the types of build-ups typically seen ahead of moves to the downside for the major averages.
We are, however, beginning to see a build-up in new highs. The five-day moving averages of stocks on the NYSE making new six-month and 52-week highs are trending higher. At the same time, the actual data (black lines) are on the verge of surpassing their September peaks.
The percentage of stocks on the NYSE that are trading above their respective 200-day moving averages has moved from 45% last week to 50% this week and is on the verge of turning the corner as it tests the short-term resistance level. Breaking above this level and retaking the 60% threshold would add another bullish breadth signal to equities.
The index remains above the rising 200-day moving average.
After turning the corner in October, the percentage of issues on the NYSE trading above their 50-day moving averages has now broken the declining trend line, which dates to last November. The metric has moved from 51% last week to nearly 65% this week. There is now a healthy majority of stocks on the NYSE that are trading in intermediate-term uptrends.
The percentage of stocks trading above their respective 20-day moving averages moved higher over the past week, from 57% to 70%. After making a series of higher lows, this indicator is now breaking above the declining trendline from the November 2020 peak as the S&P 500 trades to new highs above its 20-day moving average.
S&P 500 Breadth
Breadth metrics for the S&P 500 have improved over the past week:
- Advance/Decline Line: Trading at new highs, above the rising 50-day moving average.
- Percent Above Their 200-Day Moving Average: 73% from 69% last week, looking for a breakout.
- Percent Above Their 50-Day Moving Average: 70% from 56% last week, on the verge of a breakout.
- Percent Above Their 20-Day Moving Average: 73% from 65% last week.
SmallCap Breadth
Breadth metrics for the S&P 600 Small Cap Index also strengthened this week. Last week we said that we wanted to see weakness produce a higher low, and that appears to be playing out.
- Advance/Decline Line: Held the 50-day moving average, breaking short-term resistance.
- Percent Above Their 200-Day Moving Average: 64% from 48% last week.
- Percent Above Their 50-Day Moving Average: 75% from 49% last week, makes a higher high.
- Percent Above Their 20-Day Moving Average: 79% from 39% last week, makes a higher high.
Take-Aways:
Breadth metrics have improved across the board this week. Advance/Decline Lines are either at new highs or breaking short-term resistance. New lows continue to fall on the NYSE, while we are beginning to see a build-up in new highs. Trends appear healthy across markets and time frames. All of this lends a breadth confirmation to the bullish trend in equity prices.
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