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Key Points

  • NYSE Advance/Decline Line Holds in a Downtrend
  • NYSE New Lows Abate a Bit
  • S&P 500 Metrics Are Mixed
  • Small Cap Breadth Weakens
  • NASDAQ 100 Breadth Shows EARLY Improvement

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NYSE Breadth

The NYSE Advance/Decline Line remains in a downtrend, below the declining 50-day moving average, which has acted as a solid wall against rally attempts. The S&P 500 exhibits the same characteristics. Importantly, the indicator and the index are still in agreement, meaning that there has yet to be a bullish divergence that would indicate the potential for a change in these dynamics.

The five-day moving averages of issues on the NYSE making new 52-week and six-month lows have turned lower over the past week. The bulls will point out that this turn has commenced from a lower level than the previous peak, leaving a divergence on the chart. However, until equities prices respond by breaking through important resistance, a divergence is simply a sign to sit up and take notice, not to act.

As we should expect in a bear market that has done some severe damage at the stock level, the five-day moving averages of stocks on the NYSE making new six-month and 52-week highs continue to sit on the floor. Both metrics worsened from last week’s terrible readings. It will take time for this measure of breadth to improve.

The percentage of NYSE issues trading above their respective 200-day moving averages fell to 12% this week from 14% last week. The S&P 500 remains below its 200-day moving average, which is now moving lower. The damage that has been done to long-term trends will take time to repair.

The percentage of NYSE issues trading above their respective 50-day moving averages fell to 12% from 13% last week. The metric refuses to reverse course as the S&P 500 trades below its 50-day moving average.

The percentage of issues on the NYSE trading above their respective 20-day moving averages held at 13% this week. The S&P 500 is holding below its 20-day moving average, completing the trifecta of being in a downtrend on the timeframes that we track here.

S&P 500 Breadth

Breadth metrics for the S&P 500 were mixed on the week.

  • Advance/Decline Line: New lows below the 50-day moving average.
  • Percent Above Their 200-Day Moving Average: 15% flat from last week.
  • Percent Above Their 50-Day Moving Average: 5% flat from last week.
  • Percent Above Their 20-Day Moving Average: 7% from 3% last week.

Small Cap Breadth

Breadth metrics for the S&P 600 Small Cap Index were mostly weaker on the week.

  • Advance/Decline Line: Trending below the 50-day moving average.
  • Percent Above Their 200-Day Moving Average: 13% from 16% last week.
  • Percent Above Their 50-Day Moving Average: 14% from 17% last week.
  • Percent Above Their 20-Day Moving Average: 12% from 11% last week.

NASDAQ 100 Breadth

Breadth metrics for the NASDAQ 100 improved on the week. 

  • Advance/Decline Line: Below the 50 DMA but did not make a lower low.
  • Percent Above Their 200-Day Moving Average: 8% from 7% last week.
  • Percent Above Their 50-Day Moving Average: 10% from 9% last week.
  • Percent Above Their 20-Day Moving Average: 14% from 10% last week.

Take-Aways:

Breadth metrics remain weak across most of the major U.S. markets. New lows remain elevated while a build of new highs is elusive. A/D Lines are in clear downtrends for the most part, while the trend data that we track is generally moving in the wrong direction. This week, there is one exception to all the negative data, the NASDAQ 100. The hardest-hit area of the market is now on our radar for a POSSIBLE turn.

*Please note that due to travel plans, our research will be distributed on a modified schedule from June 24th – July 6th.

This daily note IS brought to you by Research by Potomac. Access the full Advisor toolkit and get a deeper look at the markets.

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.