If I was a good friend to the US stock market, I’d want to subtly do it a favor and save it from an embarrassing social faux pas. You see, the S&P500 has bad breadth. And as we all know, only your best friends will tell you.
Let’s take a look at nine major components of that index, and indeed of the overall stock market, and then compare them to the S&P500 index. We’re looking for these sectors to confirm the new highs that the S&P500 made a little over a week ago – on May 22nd.
Below is the chart of the S&P500. Note my dashed green horizontal line that shows us how last week’s high was in fact a new one. Now let’s take a look at the sector ETF’s to dig into the markets breadth. Warning: This may get smelly.
The financials, below, show us that this sector did in fact put in a new high. It wasn’t as impressive as the broader market – in fact, it was almost flat to that of January’s high– but hey, a new high is a new high. Score 1 for financials.
Consumer discretionary stocks, which is represented by the ETF below (we sold this ETF a few weeks ago), didn’t put in a new high in conjunction with the S&P500.
Consumer Staples, the ETF of which we bought recently, were flat. No new high in conjunction with the S&P500’s.
Utilities – we own this ETF too. Basing, but no new high—far from it!
Technology ETF—an impressive new high in conjunction with the broader index. Score 2, now, for the confirming sectors.
Healthcare. Close, but no cigar. Flat to its March high. Some might argue lower if you look at the intraday highs in March.
Industrials – no way, ‘Jose.
Energy. No new high in May. No surprise!
Materials tried and came close to matching the S&P500’s new high. But close only counts in horseshoes and hand-grenades, they say. No score.
So let’s tally it up. We have 9 major sector ETF’s presented above, two of which made new highs in conjunction with the broader S&P500 index (I covered Dow-Theory transports divergence in last weeks blog). So that’s non-confirmation by 7/9 significant sectors.
Hate to say it, Mr. Market, but you’ve got bad breadth.
One more reason that the crowd may be leaving his party pretty soon.
Keith on BNN Market Call this coming Friday June 5, 2015 at 6:00 PM
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