Breadth is stagnating with price.
Summary:
All indicators stayed relatively unchanged (except for the raw advancers-decliners), matching price. Volume on (SPY: 119.55 +0.65%) continues to be below average. Staying long remains the path of least resistance, although with volume shrinking and no significant pullback in over 2 months, I’m still looking for a correction. Watching these breadth indicators has shown that as long as breadth is expanding with price, initiating short positions is foolish. If we get a down day approaching 1% or so accompanied with a significant weakness in breadth, it may be a sign that a correction is developing.
Most oscillators (RSI, Stochastics, etc.) are near over-bought at these levels. With price stagnating, I’m considering initiating a small short position. Looking at the chart, we are so over-due for a correction. A trip back to revisit the 50 day average would not surprise me.
There were no buy or sell signals given today.
How To Read the Breadth Report
Universe Screen: Applies to top three indicators. Does not apply to 52 week new highs and lows.
- The universe contains any stock trading on average more than 100,000 shares per day with a liquidity of at least $1,000,000 per day, over the last 50 days.
1. Top most indicator is the measure of stocks in an uptrend (gray histogram) and the number of stocks trading above their 5 day simple moving averages (red line).
- Buy signal is generated for the open when the SPX is above its 200dsma and the red line crosses beneath 700.
- Sell signal is generated for the close when the red line crosses above 2500, or the trade is held for 25 days.
- Short signal is generated for the open when the SPX is trading beneath its 200dsma and the red line crosses above 2500.
- Cover signal is generated for the close when the red line crosses beneath 700, or the trade is held 25 days.
- Long trade lasts on average 24 days while short sell lasts on average 10 days.
2. The 2nd indicator is the Advance-Decline line (blue line) with a 50dsma plotted (gray line). My calculation is similar but not the same as Investopedia’s.
- Buy signal is generated for the next open when the SPX is above its 200dsma and the A-D line crosses beneath the 50 day average.
- Sell signal is generated for the close when the A-D line crosses back above the 50 day average.
- The average trade lasts about 15 days.
3. The 3rd indicator is the raw advancers and decliners, with the advancers being the green line and the decliners being the red line. There are also Bollinger Bands (purple) set 1 standard deviation beyond the 20 day average of decliners.
- Buy signal is generated for the next open after the decliners exceed the upper Bollinger Band.
- Sell signal is generated for the close when the decliners close beneath the lower Bollinger Band.
- The average trade lasts 5 days.
4. The bottom indicator is the measure of 52 week new highs new lows (histogram), with a 9dsma (yellow line) plotted over top.
- Buy signal is generated for the next open after the number of new lows exceeds the number of new highs.
- Sell signal is generated for the close when the number of new highs surpass the 9dsma.
- The average trade lasts 3 days.
Yeah, in the back of my mind I still think that 1150 breakout area really needs to be retested once more before we can get significantly higher.
No doubt. At the very least, the 20 day average needs to be pierced! Jeez., it hasn’t traded below it since early February.
Correction – From your mouth to G-d’s ears… No doubt this will be called the Yogi Memorial non-correction correction to new highs. Even with the best risk management and position sizing, being on the wrong side sucks. Back to the bear cave.