- S&P 500 Equal Weighted to Cap Weighted Ratio Gets a “Death Cross”
- NYSE Breadth Weakens Over the Past Two Weeks
- New Lows Beginning to Move Higher, Bulls Want to See a Quick Reversal
- S&P 500 Breadth is the Best of the Bunch, A/D Line Makes a New High
- Small Caps Trying to Improve but Weak Breadth Persists
Chart in Focus:
The S&P 500 Equal Weight Index relative to the S&P 500 is trying to stabilize below the 50 and 200-day moving averages which are in the process of completing a “death cross.” Holding current levels and retaking the moving averages would be a signal that breadth is beginning to improve. Below the moving averages is a sign that investors continue to favor the larger stocks in the index.
The 14-day RSI has made a higher low as the ratio stabilizes. We now want to see this divergence confirmed with the move back above the moving averages.
The Advance/Decline for the NYSE has rebounded from last week’s pullback and is now testing the declining 50-day moving average from below. The divergence that we have been highlighting for the past few weeks remains in place as this indictor fails to confirm record highs for the S&P 500, which has closed higher for five consecutive sessions.
The NYSE’s Advancing – Declining Volume Line remains below the declining 50-day moving average even after improving over the past week. Here too, the indicator is diverging with the series of record highs being set by the S&P 500.
The 5-day moving averages of issues on the NYSE making new 52-week and six-month lows have moved higher since we last wrote about them two weeks ago. Last week saw a spike to the upside which has begun to reverse this week. Equity bulls want to see these metrics continue to move to the downside in the days/weeks ahead.
The 5-day moving averages of the percentage of NYSE issues making new 52-week and six-month highs has declined over the past two weeks but have staged a rebound from the lows that were seen as stocks came under pressure last week.
The percentage of issues on the NYSE that are trading above their respective 200-day moving averages remains in the downtrend that has been in place since the start of the year. This metric is below resistance and the important 60% level and has weakened over the past two weeks.
The percentage of NYSE issues trading above their own 50-day moving averages is lower than the levels seen two weeks ago and remains below the 60% threshold. The downtrend for this indictor remains in place as it continues to diverge with the price of the S&P 500.
Two weeks ago, we noted improvement in the short-term trend metrics but over the past two weeks, the percentage of stocks on the NYSE trading above their 20-day moving averages has decreased. The recent test of its own 20-day moving average produced a higher low for this indicator, but breadth remains under pressure in the short-term.
S&P 500 Breadth
Breadth metrics for the S&P 500 remain stronger than what we are seeing for the NYSE:
- Advance/Decline Line: New high this week, above the rising 50-day moving average.
- Percent Above Their 200-Day Moving Average: 81% from 85% two weeks ago.
- Percent Above Their 50-Day Moving Average: 68% from 67% two weeks ago.
- Percent Above Their 20-Day Moving Average: 65% from 72% two weeks ago.
It is encouraging to see the A/D Line at new highs. Additionally, we note that the 20 and 50-day metrics have been making higher lows of late.
Small Cap Breadth
Breadth metrics for the S&P 600 Small Cap Index remain under pressure.
- Advance/Decline Line: Below the declining 50-day moving average.
- Percent Above Their 200-Day Moving Average: 61% from 69% two weeks ago.
- Percent Above Their 50-Day Moving Average: 50% flat from two weeks ago.
- Percent Above Their 20-Day Moving Average: 58% from 70% two weeks ago.
While the 20 and 50-day metrics have made a higher low, we note that the 200-day data remains in a downtrend.
After showing a slight improvement two weeks ago, breadth metrics weakened with the pullback in the equity market last week. This week has seen a slight rebound, but we are still hard-pressed to call breadth metrics healthy despite the S&P 500 trading at record levels.