Key Points

  • Personal Products Breakout
  • NYSE Breadth Weakens, but New Highs See a Small Uptick
  • NYSE Lows Spike to a Lower High
  • S&P 500 Metrics Weaken, but the Index Does Not Care
  • Small Cap Metrics Are Still Weak

Chart in Focus

This is not exactly the type of leadership that we like to see with the S&P 500 trading near record highs, but the market truly does not care what we would like to see. The S&P 500 Personal Products Index treaded to record levels yesterday, as this defensive group builds on the gap that opened on December 7th.  The index is above the rising 50-day moving average with price-based support in the 1,250 – 1,270 range.

The group is breaking to new highs on a relative basis, after holding support at the 50-day moving average.

NYSE Breadth

The NYSE’s Advance/Decline Line is fighting hard to hold support as the index is knocking on the door of new highs. While the S&P 500 has been able to find support at its rising 50-day moving average, the A/D Line remains below its moving average. As of now, a new high by the index would be met with a divergence from the A/D Line; something equity bulls will want to see resolved quickly.

The NYSE’s Advance-Declining Volume Line is similar to the Advance/Decline Line, trading below the 50-day moving average and trying hard to hold support. There is also a divergence between the index, which is trading near record levels, and the indicator.

The five-day moving averages of issues on the NYSE making new 52-week and six-month lows have turned higher once again as we have seen a spike in new lows over the past week. While we do not want to see spikes in new lows with the S&P 500 trading near record highs, we do note that the most recent spike has, thus far, left a lower high in place.

The five-day moving averages of stocks on the NYSE making new six-month and 52-week highs saw another small move higher over the past week. There is still a lot of work to do to get back to the higher levels that were seen earlier this year, but for now, this measure of breadth is moving in the right direction, albeit not at the pace that we would like to see.

The percentage of stocks on the NYSE trading above their respective 200-day moving averages moved to 32% this week from 38%. Truthfully, we would expect to see more of an improvement in this metric with, the index trading near record levels, above its 200-day moving average. This sets the stage for another divergence should the S&P 500 trade higher, a development that has been in place for most of the year.

The percentage of NYSE issues trading above their respective 50-day moving averages has moved to 28% from 40% last week. Again, we would want to see more improvement in this metric as the index continues to hold its 50-day moving average and trades near record levels.

The percentage of stocks trading above their respective 20-day moving averages fell to 32% from 42% last week. The index is holding its 20-day moving average. Once again, we want to see more of an improvement in this measure of short-term trend as the S&P 500 trades at record levels.

S&P 500 Breadth

Breadth metrics for the S&P 500 declined over the past week despite the index running toward record levels yesterday.

  • Advance/Decline Line: Holding the rising 50-day moving average.
  • Percent Above Their 200-Day Moving Average: 66% from 68% last week.
  • Percent Above Their 50-Day Moving Average: 53% from 62% last week.
  • Percent Above Their 20-Day Moving Average: 58%% from 62% last week.

SmallCap Breadth

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

  • Advance/Decline Line: Holding below the 50-day moving average but not breaking down.
  • Percent Above Their 200-Day Moving Average: 43% from 50% last week.
  • Percent Above Their 50-Day Moving Average: 35% from 49% two last week.
  • Percent Above Their 20-Day Moving Average: 38% from 42% two last week.

Take-Aways:

Breadth is still bad across markets, but that has been the case all year. At the same time, we are seeing more defensive leadership as Personal Products break to new highs on an absolute and relative basis. Despite these facts, the S&P 500 is knocking on the door of another record high. For index investors, the trend is bullish. For those that are more selective, being mindful of leadership shifts is vital.

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.