Below is a look at our trading range screen for the S&P 500 and its ten sectors.  As shown, the S&P 500 is just below its 50-day moving average — essentially at the flat-line.  Six sectors are currently below their 50-days, while four are above.  The Industrials sector has fallen off a cliff over the last week and moved into extreme oversold territory.  Consumer Discretionary and Health Care, on the other hand, remain overbought.  So while the S&P 500 as a whole is neutral, there has been a lot of sector divergence recently.

As mentioned above, the S&P 500 is just a hair below its 50-day moving average at the moment.  Within the index, though, just 43% of stocks are trading above their 50-days.  This is an indicator of weak breadth.  As shown below in the one-year chart of the percentage of index members above their 50-days, breadth has been getting weaker and weaker for months now, with lower highs made each time.  In fact, while the S&P has made a number of new all-time highs this year, the percentage of stocks above their 50-days hasn’t gotten above 80% all year!

While the percentage of stocks above their 50-days hasn’t gotten above the 80% mark all year, it also hasn’t been below the 30% mark either.  That’s a very tight range for a six-month period.  Below is a chart of this breadth reading going back to 2006, with the S&P 500’s price level included as well.  Normally you’ll see this reading swing much higher and lower, but not this year.  This is just another example of the completely sideways action that we’ve seen recently.

Earlier we mentioned that the percentage of stocks above their 50-days hasn’t been below 30% or above 80% all year.  Going back to 1990, below is a chart showing streaks of trading days where the reading remained between 30% and 80%.  As shown, the current streak of 122 trading days is the highest seen in 15 years, but it’s certainly not without precedent.  In fact, back in 2000 we saw a streak that was double the current one, and in 1993/94, there was a streak that reached 300+ trading days.

The one concern here is that the 2000 streak came at a time when the market was trending completely sideways right near all-time highs as it is now.  When the 122 trading day mark was hit during that streak, the index was still holding on at new-highs.  As the streak got longer and longer, though, the index began to fade, and it eventually turned into a massive bear market that coincided with the Tech bust.


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