Breadth Takes a Turn
for the Worse

by | Jan 20, 2022

Key Points

  • NYSE A/D Line Tests Support with the S&P 500
  • NYSE New Lows Spike
  • NYSE New Highs Remain Elusive
  • S&P 500 Breadth Turns Lower
  • Small Cap Metrics Are the Weakest of the Bunch

NYSE Breadth

The NYSE’s Advance/Decline Line is holding above support but below the declining 50-day moving average. Coincidentally, the S&P 500 finds itself in a similar position. Breaking support would be a bad look for the index and the indicator.

The five-day moving averages of issues on the NYSE making new 52-week and six-month lows have spiked to the upside this week and are now threatening their November peaks. A build-in of new lows would become an important confirming datapoint should the S&P 500 break below support.

At the same time, the five-day moving averages of stocks on the NYSE making new six-month and 52-week highs is fairly flat on the week. We have highlighted the fact that these metrics were not ticking higher and that we wanted to see improvement here. We are left wanting.

The percentage of stocks on the NYSE trading above their respective 200-day moving averages moved to 30% this week from 38%. The trend here has been and remains to the downside. Despite this, the S&P 500 has stayed above its 200-day moving average since June 2020.

The percentage of NYSE issues trading above their respective 50-day moving averages has moved to 30% from 42% last week. This metric remains in the downtrend that has been in place for more than a year.

The percentage of stocks trading above their respective 20-day moving averages moved to 28% from 52% last week as the S&P 500 breaks below its 20-day moving average.

S&P 500 Breadth

Breadth metrics for the S&P 500 were weaker over the past week.

  • Advance/Decline Line: Testing the 50-day moving average.
  • Percent Above Their 200-Day Moving Average: 57% from 71% last week.
  • Percent Above Their 50-Day Moving Average: 44% from 64% last week.
  • Percent Above Their 20-Day Moving Average: 30% from 56% last week.

SmallCap Breadth

Breadth metrics for the S&P 600 Small Cap Index weakened over the past week.

  • Advance/Decline Line: Breaks the 50-day moving average after another lower high
  • Percent Above Their 200-Day Moving Average: 42% from 52% last week.
  • Percent Above Their 50-Day Moving Average: 31% from 46% last week.
  • Percent Above Their 20-Day Moving Average: 24% from 46% two last week.

Take-Aways:

Breadth metrics weakened across the board this week. While we have highlighted the poor breadth dynamics for the past few months, we have been encouraged by a decline in new lows on the NYSE. However, these metrics are beginning to spike once again. With the S&P 500 below the 50-day moving average any building in new lows will likely have a cascading effect on price. An eye toward managing risk is in order.

Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.