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Key Points

  • Capital Markets are a Bright Spot in the Financial Sector
  • NYSE Breadth Remains Under Pressure
  • Uptick in 52-Week & Six-Month Lows
  • S&P 500 Breadth is the Best of the Bunch
  • Small Cap Breadth is Mostly Weaker on the Week

Chart in Focus:

While the broader Financial sector has been under pressure of late, the S&P 500 Capital Markets Index has been more resilient. On an absolute basis, the group is in a clear uptrend, defined by the rising 50-day moving average which has been support for recent pullbacks. Price-based support is in the 315 – 320 zone.

Relative to the S&P 500, Capital Markets are in the process of regaining the 50-day moving average after giving way in early July. The ratio has also broken a downtrend line from the June high.

NYSE Breadth

The Advance/Decline for the NYSE remains below the 50-day moving average and continues to diverge from the S&P 500, failing to confirm the record highs that were reached recently. Thus far, the lack of breadth confirmation has done little to harm the uptrend for the index, which remains above its own 50-day moving average.

The NYSE’s Advancing – Declining Volume Line remains weak in the near-term as well. The indicator is below its 50-day moving average and, as we noted last week, the moving average is sloping lower.

The 5-day moving averages of issues on the NYSE making new 52-week and six-month lows have ticked higher over the past week and remain above 1%. Bullish investors want to see these near-term increases begin to reverse, pushing back toward zero percent.

When looking at the 5-day moving averages of the percentage of NYSE issues making new 52-week and six-month highs, there has been a slight decline over the past week for both metrics. Equity bulls want to see this dynamic begin to reverse in the near-term.

The percentage of issues on the NYSE that are trading above their respective 200-day moving averages has turned lower once again. The metric is below the key 60% level, broken support, and the downtrend line from the beginning of 2021. As we can see, there has been a divergence playing out for most of the year, but it has yet to be confirmed by a meaningful break in price.

The percentage of NYSE issues trading above their own 50-day moving averages also remains weak, despite a slight increase over the past week. Here too, there has been a divergence in play for much of 2021.

As for the short-term trend, this is where we see the greatest improvement over the past week of trading. The percentage of stocks trading above their respective 20-day moving averages stands at 45.62%, up from ~40% last week. While this is an encouraging development, there is more work that needs to be done.

S&P 500 Breadth

Looking at the S&P 500, the breadth metrics are stronger than what we are seeing on the NYSE. This makes sense as investors have been rotating into the larger stocks within the equity market. The Advance/Decline line is testing record highs as the S&P 500 trades just below record levels. Other metrics, however, have moved lower over the past week.

  • Percent Above Their 200-Day Moving Average: 81% from 88% last week.
  • Percent Above Their 50-Day Moving Average: 52% from 53% last week.
  • Percent Above Their 20-Day Moving Average: 54% from 59% last week.

Small Cap Breadth

Small Cap breadth remains the weakest. The Advance/Decline Line is heading lower, below the declining 50-day moving average. Two of the three measures of trend are lower over the past week, one is flat:

  • Percent Above Their 200-Day Moving Average: 62% from 68% last week.
  • Percent Above Their 50-Day Moving Average: 30% from 31% last week.
  • Percent Above Their 20-Day Moving Average: 42% from 42% last week.

Take-Aways

While we truly wish that there was something new to say as it relates to the market’s breadth, we would have to make something up to do so. The divergences that we have been highlighting for the past few weeks remain in play but have not led to a meaningful breakdown in equity prices. Even Small Caps, with the weakest breadth, have done nothing worse than consolidate since March.

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.