Technology outperformed on the back of strength in semiconductors yesterday. US equities finished higher in Wednesday trading. Energy was the best performer on strength in Crude Oil. Defensive sectors lagged. Treasuries were mostly weaker. The dollar was stronger vs the yen but weaker on the euro cross. Gold gained 0.4%. WTI Crude settled up 2.3%.
The iShares Russell 2000 ETF (IWM) has a Bullish Chaikin Power Gauge rating but continues to lag the SPY. The fund is overbought and we note that it has not traded to a new high with SPY recently. IWM is above the rising long-term trend line but Chaikin Money Flow has turned bearish. The fund has a bullish Power Bar Ratio at 479 to 264.
S&P futures are down 0.1% after the S&P 500 and Nasdaq closed at new record highs yesterday. Asian markets were mixed overnight but China gained nearly 2%. European equities are weaker. Treasuries are stronger with the curve flattening. The dollar is stronger against the major crosses. Gold is up 0.1%. WTI Crude is higher by 0.3%.
Looking at Market Breadth
S&P 500 Breadth
The Advance / Decline Line for the S&P 500 continues to track the movement of the index and traded to a new high last week. For now this metric is only one that we track that is confirming the recent highs in the S&P 500 from a breadth perspective.
The percentage of stocks trading above their respective 200-day moving averages is 74% from 75% last week and is testing the breakout level from late 2019. Based on data back to 2010, when this metric is greater than 70% and the S&P 500 is above the rising 200-day moving average, the index is higher six months later 87% of the time for a median return of 6.28%. We do note that this metric still has not confirmed the market’s recent advance to new highs by doing the same.
The percentage of stocks in the S&P 500 currently above their respective 50-day moving averages is 62%, from 65% last week. Here too, the indicator is at risk of leaving a negative divergence on the chart. When this metric is greater than 60% and the S&P 500 is above the rising 50-day moving average, the index is higher three months later 75% of the time for a median return of 2.90% based on data back to 2010.
When we look at the percentage of stocks above their respective 20-day moving averages, we can see the reading moved to 67% this week from 71% last week. We have been highlighting the negative divergence between this metric and price over the past few weeks and it remains in place this week. Based on data back to 2010, when this metric is above 70% and the index is above the rising 20-day moving average, the S&P 500 is higher one month later 66% of the time for a median return of 1.15%.