Market Breadth
After making a series of lower highs over the course of 2015, our net new high indicator (the 10-day total of new highs less new lows, adjusted for total issues traded on the NYSE + NASDAQ) broke out in the first half of 2016. After a period of consolidation, we’ve seen a renewed expansion in new highs this week. If this indicator gets back in gear, it would be additional confirmation that market breadth remains robust.
Last Friday’s selling saw downside-volume outpacing upside volume by more than 12-to-1. This was the most significant downward tilt in volume since September. Wrapped around that, however, has been three sessions (one prior and two since) in which upside volume has outpaced downside volume by better than 9-to-1 on the NYSE. When looking at volume data for just the S&P 500 or just common stocks across exchanges, the bullish tilt in volume over the past two days has been even more pronounced. This thrust could be fuel to help the S&P 500 Index rebuild some upside momentum in the second half of the year.
Investor Sentiment
The sentiment data continues to offer mixed messages. Short-term sentiment indicators (like the NDR Trading Sentiment Composite) show the emergence of pessimism, but we are also seeing a dramatic drop in the VIX this week (as fear evidently is subsiding). The Investors Intelligence survey of advisory services showed a drop in optimism this week (although there was not a rise in pessimism). The AAII survey of individual investors and the NAAIM exposure index both pointed to increased optimism. Overall sentiment appears to be neutral.
S&P Financials Sector
Financial stocks continue to trend lower versus the rest of the market. Poor relative performance from this group tends not to bode well for stocks overall. On an absolute basis, breadth continues to trend higher, but the Financials have been unable to step into a leadership role. If that changes in the second half, it would likely be bullish for the S&P 500 Index.
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Twitter: @WillieDelwiche
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.
