S&P 500 Update: The Troops Are Lagging The Generals

Market breadth has obviously improved, but the degree of improvement is all over the place. In other words, some Advance-Decline (A/D) lines are signaling new highs for the market while others are lagging and remain worrisome. For instance, the S&P 500’s Adavance-Decline line has moved to a new high even before price, and this is bullish. The cumulative NYSE Advance-Decline line has retraced a bit more than price, confirming the new uptrend. However, the common stock only NYSE Advance-Decline has not retraced its decline since May as much as price has.

The real problem with breadth, which leads me to some of the bearish market indicators, is the price action of the small and midcap indices on an absolute as well as a relative basis. This can also be seen when comparing the equal weight S&P 500 with the traditional cap weighted S&P 500. We’ll have to see if seasonality helps.

Both the Russell 2000 and the S&P MidCap 400 remain below their breakdown levels. Therefore, the relative strength of the Russell 2000 remains in a downtrend vs. the S&P 500 that began in June and the S&P 400 has been underperforming the “500” since April.

This is a clear example of the troops not following the generals. Something to watch in the days/weeks ahead.

Getting back to the longer term charts, the sell signal for the S&P 500 on the monthly MACD remains firmly in place and needs a lot of work to turn this back to bullish. In addition, and on the monthly log chart, the bullish uptrend since 2009 remains busted. Whether the slope of the uptrend is just flattening is anyone’s guess, but this generally does not happen 6+ years into a bull market. On the linear chart, the bullish trendline has not been taken out and sits down in the 1,800 area looking into next year.

In conclusion, some concerns in the very short term, but the picture for the intermediate- to longer-term can be best described as split down the middle with the edge going to the bulls until major support levels finally give way.

Thanks for reading and have a good week.

Twitter:  @MarkArbeter

The author does not have a position in any mentioned securities at the time of publication.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.