US equities finished higher in Wednesday trading, with the S&P 500 closing at a new record high on the heels of a strong ADP Payrolls report. Energy and Financials led to the upside while REITs were the only sector lower on the day. Treasuries were weaker with the curve steepening. The dollar was stronger on the major crosses. Gold finished up 0.5%. WTI Crude settled up 2.3% after closing below $50/barrel on Tuesday.
The iShares Russell 2000 ETF (IWM) has a Neutral Chaikin Power Gauge rating and continues to lag the SPY though we note that it did outperform yesterday. The fund is oversold based on our indicator and Chaikin Money Flow is bullish. IWM is above the rising long-term trend line and has a bullish Power Bar Ratio at 553 to 256. We want to see the fund trade to a new 52-week high for an added breadth confirmation to the strength in equities over the past three days.
S&P futures are up 0.3% on Thursday morning. Asian equities were solidly higher overnight with Japan, Hong Kong and Korea up over 2%, while China gained more than 1.5%. European markets are gaining as well. Treasuries are slightly stronger. The dollar is flat vs the yen and the euro. Gold is up 0.4%. WTI Crude is up 0.4% after gaining more than 2.0% on Wednesday.
Looking at Market Breadth
S&P 500 Breadth
The Advance / Decline Line for the S&P 500 has rebounded with the index to trade near a new high. The metric continues to confirm the trend of the S&P 500 and we have not seen the types of divergences that would cause us to change our bullish view on the equity market in the US.
The percentage of stocks trading above their respective 200-day moving averages rose to 76% from 71% last week and has reclaimed the breakout level after falling below last week. The index is at a new high and we are now looking for this measure of long-term breadth to do the same otherwise there will be a negative divergence on the chart. Based on data back to 2010, when this metric is greater than 75% and the S&P 500 is above the rising 200-day moving average, the index is higher six months later 84% of the time for a median return of 6.02%