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Take-Aways

Breadth metrics improved this week, but there is still a lot of work to be done before we can make the claim that breadth is healthy. We continue to see scope for the S&P 500 to make a countertrend rally toward the 3,900 level. From there, we would need to see significant improvements in breadth to have confidence that a rally will continue. Digging a bit deeper into the current metrics, we note the improvement in Small Caps, as this group has been an outperformer of late.

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NYSE Breadth

The NYSE Advance/Decline Line remains in a downtrend, below the 50-day moving average, and has made yet another cycle low this week. The S&P 500 is also trading below its 50-day moving average. We have yet to see a meaningful divergence between the A/D Line and the index.

The five-day moving averages of issues on the NYSE making new 52-week and six-month lows have moved lower on the week after making a lower high during the most recent move to cycle lows for the S&P 500. This is a divergence that has our attention in the near term.

The five-day moving averages of stocks on the NYSE making new six-month and 52-week highs have moved higher again this week. Both metrics have recaptured the 1% level, a step in the bullish direction, but there is more work that needs to be done.

The percentage of NYSE issues trading above their respective 200-day moving averages moved to 17% this week from 14% last week and remained in a downtrend. The S&P 500 remains below its 200-day moving average. The bears are still in control of the long-term trend.

The percentage of NYSE issues trading above their respective 50-day moving averages moved to 21% from 14% last week. The S&P 500 is below its 50-day moving average.

The percentage of issues on the NYSE trading above their respective 20-day moving averages stands at 44%, up from 26% last week. The index has regained its 20-day moving average, once again giving investors some degree of short-term hope. However, we have seen this dynamic multiple times this year. Since hope is not a strategy, we remain skeptical until short-term improvements carry over to the intermediate and long-term trends.

S&P 500 Breadth

Breadth metrics for the S&P 500 improved on the week.

  • Advance/Decline Line: Below the 50-day moving average, made a new cycle low on Friday.
  • Percent Above Their 200-Day Moving Average: 19% from 15% last week.
  • Percent Above Their 50-Day Moving Average: 21% from 10% last week.
  • Percent Above Their 20-Day Moving Average: 57% from 20% last week.

Small Cap Breadth

Breadth metrics for the S&P 600 Small Cap Index were stronger this week.

  • Advance/Decline Line: Below the 50-day moving average, did not make a lower low last week.
  • Percent Above Their 200-Day Moving Average: 26% from 19% last week.
  • Percent Above Their 50-Day Moving Average: 28% from 13% last week.
  • Percent Above Their 20-Day Moving Average: 65% from 37% last week.

NASDAQ 100 Breadth

Breadth metrics for the NASDAQ 100 were stronger this week. 

  • Advance/Decline Line: Below the 50-day moving average, made a new low for the cycle.
  • Percent Above Their 200-Day Moving Average: 15%, flat on the week.
  • Percent Above Their 50-Day Moving Average: 17% from 6% last week.
  • Percent Above Their 20-Day Moving Average: 42% from 18% last week.

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