Saturday, September 20, 2014

The Bull Market is Over for Much of the Stock Market

The recent post highlighted the unusually weak breadth in the recent stock market.  Above is an update.  You can see that the Cumulative NYSE TICK--a measure of upticks vs. downticks across all NYSE shares--has tailed off, even as we made fresh price highs in SPX (top chart).  This is the first time this has occurred since the start of the bull market.

Much of this weakness can be attributed to the unusually weak action among small caps and recently by midcaps as well.  As you can see from the bottom three charts (shout out to the Index Indicators site), the percentages of stocks trading above their 200-day moving averages have been making lower highs as SPX has made recent price peaks.  The midcaps made a double price top before turning down lately, and the small  caps fell well short of their early July peak.  

As of Friday's close, 74% of large cap stocks (SPX) traded above their 200-day moving averages.  For the midcaps, that number is 45%; for the small caps, it is 37%.  Incredibly, as we've been making all-time new highs in the large cap averages, the majority of other stocks have not been trading in uptrends.  Even within the large cap universe, fewer and fewer shares have participated in the strength.  At the recent peak, only 15% of SPX stocks registered new 52-week highs, down from 22% in early July.

The bull market grows narrower and narrower, but the real news is that the bull market is over for a significant portion of the stock market.