Saturday, June 13, 2009

Stock Market's Rising Tide Not Lifting All Boats

Friday marked a post bear market closing high for the S&P 500 Index (SPY, above), as well as the Dow Jones Industrial Average. The 20-day volume-weighted moving average of SPY (green line above) is sloping nicely higher. It is difficult to not rate this as a bull market.

Still, yellow caution lights are flashing.

Of the 40 S&P 500 stocks in my basket (five highly weighted issues taken from each of eight sectors that I track weekly), 21 are trading in short-term uptrends, 15 are neutral, and 4 in downtrends. Readers who follow my Twitter posts (follow here) daily know that this is weaker than the readings from early in the week, when (on Monday, for example) we had 29 stocks in uptrends, 7 neutral, and 4 in downtrends.

On Monday also, 89% of S&P 500 stocks were trading above their 20-day moving averages; by Friday that number was 77%.

Among the sectors and indexes *not* making closing highs on Friday were financials (XLF), consumer discretionary shares (XLY), consumer staples (XLP), health care (XLV), the NASDAQ 100 Index (QQQQ), the Russell 2000 Index (IWM), and emerging markets (EEM), and the EAFE Index (EFA).

Perhaps most telling of all, on a day where we made a closing high in U.S. large caps, we had 796 NYSE, NASDAQ, and ASE stocks make fresh 20-day highs and 427 make new lows. That is the highest level of new lows since May 28th.

In short, we have a rising tide, but it's not lifting all boats. That often occurs when the tide is starting to come in.