Adjusted Cumulative NYSE TICK - If we look at closing prices for the S&P 500 Index (SPY) over the past five trading sessions, we can see that the index has gone essentially nowhere. When we look at the behavior of the market's largest participants, however, we see underlying selling in the market: a decided downtrend in the Adjusted Cumulative NYSE TICK. That means that we're seeing more hitting of bids than lifting of offers among the broad list of NYSE issues. This is in marked contrast to the NYSE TICK strength that we saw off the January lows. It is difficult to imagine sustaining anything other than sharp, short-covering rallies when selling sentiment remains so dominant.
New Highs/Lows - The story laid out by the NYSE TICK is confirmed by the count of new 20-day highs and lows among NYSE, NASDAQ, and ASE issues. Specifically, new 20-day lows swelled to 1270 on Friday, the highest level since the January lows. If we widen our time frame and examine new 52-week highs and lows, a similar pattern emerges. We had 13 new annual highs among the common stocks of the NYSE and 81 new lows: the most new lows since the January lows. Note, however, that those January 52-week lows numbered 700 (common stocks only), so that the vast majority of shares are above their prior lows. This may be setting us up for divergences on any test of those price lows. Interestingly, after seeing small cap strength following the January lows, we're now seeing relative weakness among smaller issues. Within the S&P 500 universe of large caps, we're seeing 2 new 52-week highs and 11 new lows. Among the S&P 600 small caps, we have 1 new high and 40 new lows. Among S&P 400 mid caps, we have 1 new high and 21 new lows. The latter two readings only are the highest level of new lows since the January bottom.
Momentum - We're currently seeing 38% of NYSE shares trading above their 50-day moving averages and 27% above their 200-day moving averages. Those numbers are essentially the same for the S&P 500 stocks; among S&P 600 small caps, we're seeing 34% above their 50-day moving averages and 21% above their 200-day averages. Among NASDAQ 100 stocks, only 29% are trading above their 50-day averages and 26% above their 200-day averages. There are large differences among sectors: Only 14% of financial stocks are trading above their 200-day averages; 81% of energy stocks are above that benchmark.
Sentiment - We're seeing some significant bearish sentiment in the equity put/call ratio, with put volume exceeding call volume during four of the past ten trading sessions, including Friday's trading. Put volume exceeding call volume has been a characteristic of intermediate term bottoms for the past several years, including the January lows. Interestingly, I am not seeing the expansion of volume on declines or the expansion of traffic on this blog that have also characterized intermediate-term bottoms. So I'd say that there is little panic, as much an absence of bullishness as an excess of fear.
Advance-Decline Lines - The AD Line for common stocks within the NYSE Composite Index continues to hover in a narrow range just above the January lows. The same pattern is present for the AD Line specific to S&P 500 large cap issues; we are very close to breaking the January AD-Line lows among S&P 600 small caps, S&P 400 mid caps, and NASDAQ 100 stocks. The greatest relative strength in AD-Line, far and away, is among the Dow 30 Industrials. These might be serving as a relative safe haven during times of financial insecurity.
All in all, the evidence is suggesting an absence of bullish interest, as observed in the NYSE TICK, the weak new highs/lows, weak momentum, and tepid AD Lines. If this pattern does not change, I will expect a test of the January lows, and will be looking for divergences among the indicators should that test materialize.
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