Monday, February 5th was an impressive session for markets:
- The S&P500 finally exceeded a 5% pullback (first time in a 12months+)
- The S&P500 went red on the year after being up nearly 6% in January
- The S&P500 saw the heaviest volume since 2016 (almost 300M shares)
Following up today’s 1.5% drop in the S&P500 $SPY, we take a quick look at market internals via 52-week highs/lows to see what they have to say.
This first chart is a YTD look at the number of NYSE stocks hitting new 52 week highs and lows. It’s quite clear to see the uptick in the number of new lows throughout the month of August to the highest levels seen all year. At the same time, the number of new highs has dried up.
While price action remains near-term choppy and ranged bound, one market breadth indicator, the cumulative advance-decline line, continues quietly trending to all time highs.
Here’s a look at the S&P500 $SPY ETF over this same time period.
If you trade stocks and you don’t follow market internals, also known as market breadth, then you’re missing out on a lot of valuable information.
Like any other study or indicator, market internals aren’t guaranteed to get it right all of the time, but when they do begin to diverge or exhibit some out of the ordinary behavior,
All eyes are on the Fed tomorrow which has the potential to be a market moving catalyst. I have no helpful insights into what remarks to look for from the release, but I can outline the current stock market technicals to help you create a plan for the reaction.
- The $SPY ETF is trading around its largest pullback YTD which is a laughable 3 SPY points off highs.
- The VIX is off YTD lows, trading north of 12 and was up about 10% on the day earlier in the session.
Markets closed strongly in the green today after a mostly red open and early sluggish action. Even the slightest weakness continues to get bid up.
We’ve closed higher 5 days in a row in the S&P500 and it’s clear on nearly any market indicator that we are in overbought territory.
Today, we have our newest confirmation that sentiment is near-term excessively bullish, based on the closing total put/call ratio seen below.
Today marked a new all time closing high today in the S&P500 after roughly 26 days of consolidating within a percent or two from highs.
Even better, was the surge in market breadth that we saw along side of this move.
Yesterday we wrote about the Nasdaq Composite springing the bull breakout trap and today we’re seeing major indices dance around slightly red on the day struggling to put together a follow through day to the downside.
One measurement I like to use to determine how frothy we are to the up or downside are a % of stocks above a moving average, in this case the 10SMA:
The stock market continues to rally.
Just today the Russell 2000 $IWM made new intraday all time highs.
So as we march higher, lets take a look at some of our favorite market breadth indicators for confirmation in this move.
Below this chart of the S&P500 $SPY I have displayed NYSE New Highs / New Lows and cumulative Advance decline line indicators.
The market has been a mess over the past few months.
We’ve chopped around in micro ranges, and moved sideways with a slight downward bias ever since we made new all time highs in the $SPY back in August.
One indicator that has identified oversold bounce levels over this period is the McClellan Oscillator.