The Breadth Picture
Is Unchanged This Week

by | Jan 13, 2022

Key Points

  • Tobacco Making a Comeback?
  • NYSE New Lows Make a Lower Low
  • NYSE New Highs Need to Do More
  • S&P 500 Breadth Is Flat on the Week
  • Small Cap Metrics Fade, Especially in the Short-Term

Chart in Focus

Over the past few weeks, we have highlighted outperformance on the part of defensive sectors of the S&P 500. Drilling down on this theme, we can see that Tobacco is making a comeback on an absolute and relative basis. The price is breaking above prior resistance near 1,070, and the 50-day moving average is curling higher. The relative ratio is also making a bullish turn above a rising 50-day moving average.

NYSE Breadth

The NYSE’s Advance/Decline Line is holding above support but continues to have a hard time breaking above the declining 50-day moving average. With the S&P 500 testing and holding its 50-day moving average, we want to see the A/D Line begin to confirm.

The five-day moving averages of issues on the NYSE making new 52-week and six-month lows are moving lower after making another lower high earlier this week. While equity bulls would prefer to see these metrics fall to zero and stay there, for now, we must be content with a falling trend since the November peak.

At the same time, the five-day moving averages of stocks on the NYSE making new six-month and 52-week highs is working on a higher low after bottoming in December. While these metrics have improved in the near term, we are looking for more.

The percentage of stocks on the NYSE trading above their respective 200-day moving averages moved to 38% this week from 36%. We want to see more of an improvement in this metric as the S&P 500 trades near record levels and above its 200-day moving average. For now, the downtrend remains in place for this indicator.

The percentage of NYSE issues trading above their respective 50-day moving averages has moved to 42% from 38% 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 52% from 49% last week as the S&P 500 tests its 20-day moving average. This metric has improved over the past few weeks, and crossing 50% is a bullish development.

S&P 500 Breadth

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

  • Advance/Decline Line: holding near record levels.
  • Percent Above Their 200-Day Moving Average: 71% from 70% last week.
  • Percent Above Their 50-Day Moving Average: 64% from 65% last week.
  • Percent Above Their 20-Day Moving Average: 56% from 63% last week.

SmallCap Breadth

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

  • Advance/Decline Line: testing the 50-day moving average after another lower high.
  • Percent Above Their 200-Day Moving Average: 52% from 54% last week.
  • Percent Above Their 50-Day Moving Average: 46% from 53% last week.
  • Percent Above Their 20-Day Moving Average: 46% from 67% two last week.

Take-Aways:

While I wish there was something compelling to say about the market breadth this week, there just isn’t. The picture across markets is mostly unchanged. The small improvements in the 50 and 20-day NYSE data are encouraging in the near term, but we want to see new highs across markets sustain their accumulation.

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.