Breadth weaker on the latest recovery

Last June, I introduced breadth data for capitalisation groups provided by Pinnacle Data Corp. Then in July, I showed examples of divergences on this data marking turning points. Here is the current situation.

S&P500 Index and %age of stocks above 50 day moving average

• The April 2011 peak had a breadth divergence that built up from October 2010 (6.5 months)
• The October 2011 low had a breadth divergence from August 2011 (3 months)
• The March 2012 peak had a breadth divergence that built up from early February 2012 (2 months)
• The current breadth divergence has been in place since late January (3 months)
• Sometimes, there isn’t a breadth divergence on this indicator (2012) but there is on other breadth indicators
• The current breadth divergence is likely to take its toll soon

S&P500 Index and %age of stocks above 100 day moving average

• This longer period moving average breadth indicator had its first divergence on the 11 April high
• By 18 April, breadth was the lowest this year
• Although price has almost reached its 11 April high, breadth has not and this is replicated across breadth indicators for other market capitalisation groups

Cumulative breadth divergences

On 16 October, I showed a divergence on the cumulative advance-decline line for the S&P100 Index. This divergence has now been blown away.

I said at the time that there were other breadth indicators not showing divergence. These can only be used as a warning, not a timing device. Using in conjunction with the moving average breadth charts will help, along with confirmation from RSI divergences on the indices.