Using breadth as a reason to become bullish has produced a few “head fakes” in 2022. However, some developments catch our attention. New lows have been falling for the past month, while Upside Breadth and Volume Breadth have registered impressive readings in two of the past four days. This sets the stage for the bulls to flip the match in their favor. They just must push the S&P 500 through resistance near the 4,000 level.
NYSE New Lows
The percentage of stocks on the NYSE making new six-month and 52-week lows has been declining since June. It is also worth noting that the 10-day moving averages for these metrics made a lower high in June despite the S&P 500 making a lower low.
If we focus on the six-month data, the 10-day moving average crossed below the 5% mark on July 19th. Since 1990, there have been 88 instances where the 10-day moving average crossed the 5% threshold. The S&P 500 has been higher three months later 74.42% of the time for a median return of 4.25%. This improves on the baseline three-month statistics of 69.43% and 2.98% over the same time period.
NYSE Upside Breadth
On the NYSE, advancers as a percentage of advancers plus decliners have registered two reading above 80% in the past four days. A cluster of readings above 80%, as opposed to the one-offs that we saw in 2021 and for much of 2022, would be a data point that supports higher prices.
Volume breadth looks at the volume in advancers as a percentage of the volume in advancers plus decliners. This metric has also ticked the 80% box in two of the past four days.
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