We hit bull market highs today in the S&P 500 (ES) and NASDAQ 100 (NQ) e-mini futures markets and the Dow Jones Industrial Average (DIA). However, quite a few segments of the market were lagging. New 20-day highs were about 900 on the day, down from over 2500 at the October peak. Notably falling short of bull highs were the Russell 2000 Index (IWM) and the S&P 400 midcap stocks (MDY), as well as the Dow Transports and Utilities.
We also failed to make new bull highs across a number of sectors from the S&P 500 universe, including materials shares, energy stocks, financials, homebuilders, and utilities.
Indeed, according to FinViz, only 53% of all stocks are trading above their 20-day simple moving averages. We are also shy of bull highs in the advance/decline line for all NYSE common stocks, according to Decision Point. Decision Point also reports that over 90% of NYSE shares were above their 20-day exponential moving averages in September. That declined to a bit over 80% at the October peak and now stands at 68%.
All of these are yellow caution lights, not outright sell signals. Should, however, we fail to see a pickup in strength/breadth and prove unable to sustain those new price highs in the large cap indexes, I would expect to see a healthy retracement of the market's rise thus far in November. Conversely, a broadening of the rally would suggest that the bull is intact, continuing its pattern of successively higher price lows during corrections.
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3 comments:
The inability to sustain a move above ES 1100 on the first bull charge, and the inability to retake 1100 multiple times today can't be seen as a good sign for the bulls either.
If the market starts moving down tomorrow, the prominent "double top" is likely to precipitate additional selling at least to the 1070 level.
Simultaneous large amounts of charts breaking bullish, AND breaking bearish tell me a story of a fractured market. Not a tired market though, fractured, and still got game.
The fact that we are up this high in the market in such a short period of time and not selling off meaningfully speaks to how strong this market is. A very tough market to be short. This market wants to trade above 1100 based on the price action.
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