Take-Aways:
Last week we noted that we needed to see more from our breadth metrics to have confidence that the S&P 500 could break and hold above 3,900. Thus far, the market has delivered, and the door is now open to a run toward the 4,100-4,200 zone for the index. We are encouraged to see the percentage of stocks trading above their respective 200-day moving averages continue to improve, a sign that stronger short-term metrics are beginning to drift into the long-term metrics.
NYSE Breadth
The NYSE Advance/Decline Line is holding above the 50-day moving average and the S&P 500 has broken above its moving average. We have argued that we would like to see continued improvement on the part of the A/D Line to have confidence in equity rallies, and that is slowly playing out.
The five-day moving averages of issues on the NYSE making new 52-week and six-month lows have moved lower this week. Last week we wrote that “we want to see these metrics maintain a downtrend as the index moves through 3,900.” These metrics are approaching their yearly lows.
The five-day moving averages of stocks on the NYSE making new six-month and 52-week highs were split over the past week. Six-month data is moving higher while the 12-month metrics move to the downside. Importantly, the six-month metric has taken out the April peak, signaling that breadth is improving on the intermediate time frame.
The percentage of NYSE issues trading above their respective 200-day moving averages moved to 31% this week from 24% last week. This metric is back to the levels seen in August even though the S&P 500 is at a lower level. It can be argued that this constitutes a bullish divergence. We are now on watch for both to clear their August peaks to increase the odds of further equity strength.
The percentage of NYSE issues trading above their respective 50-day moving averages moved to 69% from 44% last week. The S&P 500 has cleared its 50-day moving average, opening the door to a run to the 4,100-4,200 zone.
The percentage of issues on the NYSE trading above their respective 20-day moving averages stands at 76%, from 58% last week. The index is above the rising 20-day moving average.
S&P 500 Breadth
Breadth metrics for the S&P 500 were mixed over the past week.
- Advance/Decline Line: Holding above the 50-day moving average.
- Percent Above Their 200-Day Moving Average: 50% from 35% last week.
- Percent Above Their 50-Day Moving Average: 80% from 58% last week.
- Percent Above Their 20-Day Moving Average: 81% from 66% last week.
Small Cap Breadth
Breadth metrics for the S&P 600 Small Cap Index were slightly weaker on the week.
- Advance/Decline Line: Above the 50-day moving average.
- Percent Above Their 200-Day Moving Average: 48% from 37% last week.
- Percent Above Their 50-Day Moving Average: 75% from 58% last week.
- Percent Above Their 20-Day Moving Average: 71% from 57% last week.
NASDAQ 100 Breadth
Breadth metrics for the NASDAQ 100 were mostly stronger over the past week.
- Advance/Decline Line: Moves above the 50-day moving average.
- Percent Above Their 200-Day Moving Average: 42%, from 24% last week.
- Percent Above Their 50-Day Moving Average: 76% from 48% last week.
- Percent Above Their 20-Day Moving Average: 84% from 58% last week.
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