Fewer stocks above their long-term moving averages

April 15, 2013No Comments

It’s no surprise that the number of stocks trading above their 200 day and 50 day MA’s has been falling this year for the TSX. As you are likely aware, the TSX has not been a very good story this year, nor for the past 5 years. The chart below shows the Canadian breadth profile according to this indicator. I’ve circled the recent quarter, which aligns with a weakening TSX.

The number of stocks trading above their 50 day moving averages, and 200 day moving averages has also been declining on the NYSE – this despite the bullish profile of both the DJIA and the S&P500 indices. This comes as a surprise, and adds further fuel to my thesis that the current rally is growing old. I’m absolutely convinced that we’ll be seeing a seasonal peak on the US markets very shortly. As discussed in past blogs, the Canadian market peak for the spring occurred in late March in the3 of the past 4 years. That’s why I sold my TSX 60 index shares and a few other Canadian blue chips back in late March. Now may be the time to sell higher beta US holdings, given the same breadth profile for that market. Here’s the chart for the % stocks over the 200 day MA, vs. the DJIA (in red):

Revisiting an old chart

 

Here’s a chart that I posted about a year ago regarding the market reaction to quantitative easing. It’s worth revisiting. Note the tendency for the US market to weaken at the end of each QE (or “twist”) stimulus program. With recent Fed talk about QE potentially ending in late 2013 or early 2014—what do you think will be in store for the markets? Your comments are welcome below.

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