Breadth overhangs

We just published our Charted Market Insights and noted risks from expanding new 52-week lows and a deterioration in the percentage of stocks below 200-day moving averages (DMAs), even in the face of the recent higher highs in the S&P 500 advance-decline and volume advance-decline lines. This blog post flags similar risks from the percentage of stocks above 50-DMAs and 100-DMAs on the S&P 500.

Percentage of S&P 500 stocks above 50-DMAs remains in an early July downtrend

How many stocks in the S&P 500 (SPX) were above their 50-DMAs when the SPX reached a record high last week? Just 56%, which marks another lower high within the downtrend for this tactical breadth indicator from early July. That's a significant lack of confirmation of the record highs that the SPX has achieved in July, August, September, and October.

Yesterday, the SPX stood approximately 3% above its rising 50-DMA near 6647 with only 38% of stocks above their 50-DMAs.

The low for this indicator on the 10/10 downward spike to 6550 on the SPX was 36%.

Chart 1: S&P 500 (top) and percentage of S&P 500 stocks above 50-DMAs (bottom)

Bearish pattern for the percentage of S&P 500 stocks above 100-DMAs

The percentage of S&P 500 stocks above their 100-DMAs remains bearish after topping out near 75% in late July and late August. An October breakdown and retest of the 58-59% area confirmed this weaker setup, even in the face of higher highs for advance-decline and volume advance-decline lines moving into late October. This indicator is breaking lower once again, which is a market risk.

Yesterday, the SPX stood approximately 6% above its rising 100-DMA near 6548 with just 44.6% of stocks above their 100-DMAs. This is a significant divergence against the higher highs for the SPX into late October and market risk.

Chart 2: S&P 500 (top) and percentage of S&P 500 stocks above 100-DMAs (bottom)