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The decline for the S&P 500 has reached a logical level for the downtrend to pause and catch its breath. The next move will determine if there is going to be further downside or if we have seen the lows for the move. At the same time, there is finally something encouraging to say about breadth. Across major U.S. averages, new six-month and 52-week lows have been declining. If the index can reclaim the 4,100 level while lows continue to decline, it becomes much easier to make a bullish case for stock prices. However, until that time, the bears are in control and can pull away with a break of 3,815.

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S&P 500 and Key Retracement Levels

The S&P 500’s downtrend from the January highs remains firmly in place. However, it has reached the level that marks a 38.2% retracement of the advance from the March 2020 low. Yesterday we noted that the index was trying to stabilize, and these key retracement points are a logical place for the downtrend to pause. The key for investors is the reaction from here. A break below the retracement level at 3,815 sets the stage for a move toward 3,505. A move above 4,100 would be a win for the bulls that allows them to begin to make a stronger case. Between these two price points, there is a high risk of investors being whipsawed.

NYSE Lows

After trading to a new one-year high on May 12th, the 10-day moving average of the percentage of stocks on the NYSE making new six-month and 52-week lows has been on the decline.

S&P 500 Lows

There is a similar dynamic at play for the S&P 500. The 10-day moving averages of the percentage of stocks making new six-month and 52-week lows have been declining since peaking on May 12th.

NASDAQ 100 Lows

The 10-day moving averages of the percentage of NASDAQ 100 stocks making new six-month and 52-week lows have also taken a turn to the downside over the past two weeks.

S&P 600 Lows

The S&P 600 is not sitting out the improvement in the new lows. Here too, the 10-day moving averages of the percentage of stocks making new six-month and 52-week lows have been declining over the past two weeks.

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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.