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Breadth weaker on the latest recovery

April 29, 2013

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

SPX 50 DAY BREADTH 290413

  • 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

100ma

  • 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.

oexcum
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.

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