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.
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7 comments:

stocksystm said...

Thank you for pointing this out. My personal portfolio has been underperforming the market for a couple of weeks now, but I was having diffulty pinpointing the culprit.

stocksystm said...

Before I go, I was curious if you know what have been the best performing sectors the past couple of weeks?

Chee said...

Dr. Steenbarger,

I was wondering what your definition of uptrend, neutral, and downtrend for these 40 stocks are?

Regards,
Chad

Chee said...

Dr. Steenbarger,

I was wondering what your definition of uptrend, neutral and downtrend are for those 40 stocks?

Regards,
Chad

Brett Steenbarger, Ph.D. said...

Hi Stocksystm,

I post relative sector performance each weekend and will post shortly; thanks--

Brett

Brett Steenbarger, Ph.D. said...

Hi Chad,

I quantify trending in a proprietary manner that is akin to calculating the slope of a regression line and the goodness of fit to that line--

Brett

Dave Narby said...

I assume the last sentence was supposed to say "...the tide is starting to go out" (not come in)...

Assuming here that more new lows vs. new highs in a rising market is bearish.