Best Thread Market Breadth

[Dentalfloss]

a bit from futures magazine that was published on facebook
Since the middle of April everyone, including their grandmother, seems to have been building a short position in the equities market. We know picking tops or bottoms fighting the major underlying trend is risky business, but most individuals cannot resist.

The rush you get trying to pick a major top or bottom is flat out exciting and that is what makes it so darn addicting and irresistible. If you have ever nailed a market top or bottom, then you know just how much money can be made. That one big win naturally draws you back to keep doing it much like how a casino works. The chemicals released in the brain during these extremely exciting times are strong







































enough that even the most focused traders fall victim to breaking rules and trying


these type of trades.


So if are going to try to pick a top, you better be sure the charts and odds are leaning in your favor as much as possible before starting to build a position.

Below are a few charts with my analysis and thoughts overlaid showing you some of the things I look at when thinking about a counter trend trade like picking a top within a bull market.

Utility Stocks vs. S&P 500 Index Daily Performance Chart:

The SPY and XLU performance chart below clearly shows how the majority of traders move out of the slow moving defensive stocks (utilities – XLU) and starts to put their money into more risky stocks. This helps boost the broad market. I see the same thing in bonds and gold this month, which is a sign that a market top is nearing.

That being said when a market tops, it is generally a process that takes time. Most traders think tops are a one day event, but most of the times it takes weeks to unfold as the upward momentum slows and the big smart money players slowly hand off their long positions to the greedy emotion drove traders.

Look at the chart below and notice the first red box during September and October. As you can see it took nearly six weeks for that top to form before actually falling off. That same thing could easily happen again this time, though I do feel it will be more violent this time around.

 

[Dentalfloss]

from Jason levitt
I’ve said several times the last few weeks to lay down your analysis tools because the market has a mind of its own right now. It’s going to do what it wants to do. But laying down my tools doesn’t mean I’m ignoring them. I’m still checking a few out to see how the current rally compares to past rallies. According to the following SPX Bullish % chart, the extent of the current rally has produced more buy signals on the point-n-figure charts than another other rally the last three years. A full 90%!. When the market first rallies, only the best companies move up. Then good and average companies join. Eventually the bottom of the barrel stocks participate. That’s what’s happening now. Everything, even the garbage stocks, are being bid up.

 

[isatrader]

Volatility Breadth Charts

Attached is the updated volatility breadth charts

 

[isatrader]

New Highs New Lows $NYHL

Attached is the New Highs / New Lows charts.

 

[isatrader]

Advance Decline Breadth Charts

Attached is the updated Advance Decline Breadth Charts, including the cumulative AD line, momentum index, cumulative AD volume line, 10 Day AD oscillator, NYSE Volume Advancing / Volume Declining Ratio and the McClellan Oscillator and Summation Index. Note that the short term McClellan Oscillator has reached a the lower zone where it has often rebounded from in the recent past.

 

[isatrader]

Moving Average Breadth Charts Update

Attached is the NYSE long, medium and short term moving average breadth charts and the NYSE Bullish Percent Index.

The medium and longer term charts remain on bull confirmed status currently, but this week saw a number of changes in the short term moving average breadth charts with the NYSE, S&P 500, Nasdaq 100 and Dow 30 Percentage of Stocks above their 50 day Moving Averages charts all reversing to a column of Os, and in three of the above they made high pole warnings, and so have reversed more than 50% of the previous column of Xs. And the major NYSE short term chart status has now moved to Bear Alert, as it closed below the key 70% level.

So overall the short term charts have moved to Bull Correction/Bear Alert, whereas the medium to longer term charts still remain on Bull Confirmed currently in the upper range. Below is the updated table and the major charts.

 

[isatrader]

US Industry Sectors Breadth

It was a very mixed week for the major sectors, with only minor moves up or down. None of which changed the status of any of the sectors overall.

Consumer Staples switched places with Financials to move to the top of the relative strength table with 82.63% of Consumer Staples stocks in the US now above their 150 day moving averages. Whereas Basic Materials still occupies the bottom spot and is the only sector in bearish territory below 50% at 44.97% of Basic Materials stocks in the US above their 150 day moving averages.

Below is the data table for the Percent of Stocks Above 150 Day Moving Average in each sector which I've ordered by relative strength, with the highest to the lowest percentage in each sector. Also attached is the visual diagram of the 9 sectors and the overall NYSE Percentage of Stocks above their 150 day Moving Averages, plus the 1% P&F chart and line chart of the nine sectors.

 

[isatrader]

S&P 500 Cumulative P&F Breakouts - Breakdowns

Another week of gains for the S&P 500 Cumulative P&F Breakouts - Breakdowns chart. However, it did slow it's ascent at the end of the week. But even so, there was still 22 breakouts to only 5 breakdowns for the week in total, so still a bullish bias currently with 185 breakouts to 18 breakdowns since the start of the month.

 

[isatrader]

Attached is the NYSE long, medium and short term moving average breadth charts and the NYSE Bullish Percent Index.

This week saw a number of changes in the moving average breadth charts across the board, with the NYSE long, medium and short term gauges all having status changes. The long and medium term chart reversed to a column of Os and are close to the key 70% level, but haven't moved below it as yet, and so are currently on bull correction status. However, a move below 70% would change that to Bear Alert.

The short term moving average breadth charts saw some double bottom breakdowns with the NYSE and DOW 30 Percentage of Stocks above their 50 day Moving Averages charts both moving to Bear Confirmed status, while the S&P 500, Nasdaq 100 both dropped below 70% and so moved to Bear Alert status.

So we've seen a further deterioration from last week with the short term charts now fairly bearish and the long and medium term charts starting to feel the effects as well. Below is the updated table and the major charts.

For those that prefer the line charts, the relative performance versus the S&P 500 closed below the zero line (52 week MA) as you can see at the bottom of the charts which for example on the 150 Day MA chart in the last year or so has only occurred in May 2012, November 2012 and for a single week in April 2013. So a fairly cautionary sign there.

 

[isatrader]

Advance Decline Breadth Charts

Attached is the updated Advance Decline Breadth Charts, including the cumulative AD line, momentum index, cumulative AD volume line, 10 Day AD oscillator, NYSE Volume Advancing / Volume Declining Ratio and the McClellan Oscillator and Summation Index.

Note the breakdowns in the 10 Day Advance Decline Oscillator and the McClellan Oscillator to their lowest levels since November 2012.

 

[isatrader]

New Highs New Lows $NYHL

Attached is the New Highs / New Lows charts.

 

[isatrader]

S&P 500 / Commodities Ratio

The S&P 500 divided by the Continuous Commodity Index chart continues it’s early Stage 2 run with another 4.74% gain this month, and continues to highlight the long term rotation out of commodities and back into stocks.

 

[Babyblush]

What's actually the difference between these and how helpful are they for us while trading. Also how accurate is the market breadth signal provider.

 

[isatrader]

What's actually the difference between these and how helpful are they for us while trading. Also how accurate is the market breadth signal provider.

There's no signal provider. If you are interested in market breadth, I'd suggest researching and testing it yourself. A good place to start is Investors Intelligence that created the bullish percent in 1955, or Dorsey Wright that have also done a lot of work on the subject.

 

[isatrader]

New Highs New Lows $NYHL

New Highs - New Lows has broken down intraday, and is now the lowest it's been since November.

 

[isatrader]

A number of changes in the various breadth indicators today (6/6/13), but I will save the majority for the weekend and just highlight a few tonight. Firstly the S&P 500 and Nasdaq 100 Bullish Percent Indexes saw changes today with the S&P 500 Bullish Percent ($BPSPX) reversing to a column of Os and changing to Bull Correction status. Whereas the Nasdaq 100 Bullish Percent ($BPNDX) made a triple bottom breakdown and is now on Bear Confirmed status.





The moving average breadth charts also saw a lot of downward movement and it was enough to cause the longer term NYSE Percentage of Stocks above their 200 day Moving Averages chart to make a double bottom breakdown below it's April column of Os and move to Bear Confirmed. So now the long term and short term moving average breadth charts are on Bear Confirmed status and the medium term NYSE Percentage of Stocks above their 150 day Moving Averages chart is on the cusp of joining them, and it's line chart did make a lower low today, but it just wasn't enough to add another O to the chart and so needs to close another 0.07 lower to go to Bear Confirmed also.

 

[isatrader]

Market Breadth Update

Attached is the NYSE long, medium and short term moving average breadth charts and the NYSE Bullish Percent Index.

 

[isatrader]

Advance Decline Breadth Charts

Attached is the updated Advance Decline Breadth Charts, including the cumulative AD line, momentum index, cumulative AD volume line, 10 Day AD oscillator, NYSE Volume Advancing / Volume Declining Ratio and the McClellan Oscillator and Summation Index.

Notes:

• Cumulative Advance Decline Line - has pulled back to it's 50 day MA and rebounded off of it to move a little bit higher over the last few days
• Advance Decline Momentum Index - near the April swing low
• Cumulative Advance Decline Line 10 and 30 day moving averages is on the cusp of a potential crossover to the downside. Which would be a an intermediate term signal as you can see from the previous arrows on the chart
• Cumulative Advance Decline Line - the detrended distance above the 200 day EMA chart shows a breakdown below the last few months range lows
• Advance Decline 10 Day Oscillator - reached an extreme reading of over -800 on Wednesday and has since rebounded taking off some of the short term oversold state it showed
• Advance Decline MACD line - has broken below it's April swing low and is close to the zero signal line
• Advance Decline Volume - the alternative AD volume measures are showing the same signs as the straight advance decline data
• McClellan Oscillator - reached an extreme reading below -100, which was lower than it's November 2012 low, and has rebounded
• McClellan Summation Index - has broken below the April swing low

 

[isatrader]

New Highs New Lows $NYHL

Attached is the New Highs / New Lows charts

 

[isatrader]

The Advance Decline measures that I follow are giving some negative signals intra-day today, with a negative crossover of the 10 and 30 cumulative advance decline line moving averages - which I consider a medium term sell signal (see previous signals on the chart to compare).

The momentum index at the top of the chart - which is the 200 day moving average of the one day Advance minus Decline total is also breaking down, as well as the MACD momentum line at the bottom of the chart breaking below it's zero line.