Market Insight

Fear Levels at an Extreme - Buying Opportunity?

We have previously noted on this blog that extremes in VIX and the Put/Call Ratio tend to precede short-term market trend turns.  

Note in the chart below, the black circles highlight extremes in VIX and Put/Call.  Extremely high readings in these indicators (as we are seeing this morning) have tended to precede a bounce or resumption of the uptrend.  The block arrows demonstrate the upward turns in the S&P 500.

Probably not a bad time to wade into partial longs or an opportunistic e-Mini S&P 500 futures contract on the long side.

 

fear

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Which ETF's Fared Best During Thursday's Sell-off?

Baseline Analytics screened over 1400 ETF's to find those that excelled during Thursday's 2.1% decline in the S&P 500.  

But instead of presenting the obvious ETF's such as ultra-leveraged inverse ETF's, VIX-based ETF's  and Gold ETF's, we pruned the list of these instruments to identify yesterday's "other" relative strength winners.  These ETF's can be considered as hedged to a well-diversified, risk-managed portfolio.  

We DO show some bond ETF's (you can imagine that there were many winners in those categories).  One such ETF is the "Build America" municipal bond ETF (BAB), with a 4-Star Morningstar Rating and a 4.7% yield.

The results of Baseline Analytics' stock and ETF screens are delivered in a downloadable Excel file.  This file can be sorted to identify various performance and technical criteria to help provide a further edge to your trading and investments.  Instructions are provided to guide you through your review. Our goal is to deliver such opportunities at your fingertips, with minimal research and analysis needed on your end.  We do provide a link to Yahoo Finance for each of our timely picks should you want to delve further into particular equities or ETF's.

Subscribers to Baseline Analytics receive our proprietary screens regularly, as well as our TrendFlex family of market trend signals and risk assessment tools.

Click here for the report.

Sign up for a Free Trial and check out our reports and TrendFlex signals for the next 30-days.

 

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Buys and Sells for a Crazy Market; ETF Signal Updates Tonight!

Two new Wrapper reports were added today: Buys and Sells, Overbought and Oversold Stocks (and a similar report for ETF's), based on 8/18 market close.  Our "Volume Surge" report format provides further insight into relative strength, trend power and accumulation or distribution based on volume comparisons.  

Following the close of markets today, we will update our ETF signal list.  Below is a snapshot of the results posted last week.  It will be interesting to see what has changed!

signals

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Dow Theory Divergence Update - 8/11/15

Last time we wrote on the Dow Theory divergence, the Dow was near its May top while Transports languished.

On the updated chart below, Transports have bounced from support near 8000, following retracement action in the Dow.  Could this suggest the resolution of the divergence and presage a climb in both averages? 

dowtheory08102015b

For those interested in exploring Transports further, Baseline Analytics has run its Volume Surge Report against transportation industry leaders.  Criteria was to include only those Transports trading above their 200-day moving average. The list is sorted by "volume surge," showing yesterday's volume as a multiple of the 50-day average volume.  We also removed Transports that lost ground during yesterday's 1.3% gain in the S&P 500.

Click here for today's free report.  Subscribers to Baseline Analytics receive similar targeted stock lists regularly to identify timely trading and investment opportunities.  

 

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Swing Trade Gold? -- 7/26/2015

Baseline Analytics runs a collection of 54 system tests to find the top-performing four systems for various ETF's over the year-to-date timeframe.

We ran GLD (the SPDR Gold Trust Shares) and the top-performing four systems all flashed BUY signals.  These signals were generated as early as the market close on 7/16 and as late as the market close on 7/23 (when 2 of the 4 flashed a BUY signal).

Per the chart below, note GLD's surge on Friday. A few maybe smart contrarians stepped in to buy.

GLDDaily

But then look at the weekly chart.  Feels more like the falling knife scenario.

GLDweekly

Finally, bringing in our Italian mathematician Leonardo Fibonacci (also known as Leonardo of Pisa and Leonardo Pisano Bigollo - I guess if your system does not work you can hide under a different name), the monthly chart shows GLD closing in on the 61.8% retracement drawn from the peak in mid-2011 to the low in 2005, at a price of 94. GLD closed on Friday at 105.35, but perhaps we are close enough to that low to warrant partial long positions.

GLD Monthly 

If you decide to bit the golden bullet, mind the large gap between 106.50 and 108.50.  Also are be prepared to get hit by those traders that bought near the bottom on 7/24, looking to get out with your purchase.  

GLD60

Gold has come a long way from its peak in 2011.  But price carnage like this awakens the opportunistic traders (and long term investors). It is worth watching GLD as well as GDX and the various gold miner ETF's.

 

 

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Shorts Candidates in a Toppy Market

Baseline Analytics has refined a series of stock and ETF-screening algorithms that pinpoint timely trade and investment opportunities.

The results of Baseline Analytics' stock and ETF screens are delivered in a downloadable Excel file.  This file can be sorted to identify various performance and technical criteria to help provide a further edge to your trading and investments.  Instructions are provided to guide you through your review. Our goal is to deliver such opportunities at your fingertips, with minimal research and analysis needed on your end.  We do provide a link to Yahoo Finance for each of our timely picks should you want to delve further into particular equities or ETF's.

As a special offer, Baseline Analytics is providing our latest potential "Short Sale" list, developed after the market close on Wednesday July 22, at no charge.  This list comprises stocks that are overvalued based on several fundamental criteria. See the list's instructions to identify potential short candidates.

Subscribers to Baseline Analytics receive our proprietary screens regularly, as well as our TrendFlex family of market trend signals and risk assessment tools.

Click here for the report.

Sign up for a Free Trial and check out our reports and TrendFlex signals for the next 30-days.

 

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High Probability Trades At Your Fingertips

Baseline Analytics has refined a series of stock and ETF-screening algorithms that pinpoint timely, high-probability trades and investment opportunities.

The results of Baseline Analytics' stock and ETF screens are delivered in a downloadable Excel file.  This file can be sorted to identify various performance and technical criteria to help provide a further edge to your trading and investments.  Instructions are provided to guide you through your review. Our goal is to deliver such opportunities at your fingertips, with minimal research and analysis needed on your end.  We do provide a link to Yahoo Finance for each of our timely picks should you want to delve further into particular equities or ETF's.

As a special offer, Baseline Analytics is providing our latest "Buy Signals" list, developed after the market close on Thursday July 16, at no charge.

Subscribers to Baseline Analytics receive our proprietary screens regularly, as well as our TrendFlex family of market trend signals and risk assessment tools.

Click here for the report.

Sign up for a Free Trial and check out our reports and TrendFlex signals for the next 30-days.

 

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Key Divergence Warns of Waning Momentum - 7/15/15

As the S&P 500 looks to attempt another new high and volatity settles back, a key momentum indicator continues to linger near its recent lows.

Note below our Breadth and Internal Strength chart, a familiar layout in the Baseline Analytics Market Tour.  The continuation of the S&P 500 uptrend following December, 2014 (brown line, top portion of chart) was met with a lagging summation index (blue line, bottom portion of chart).

bs07152015 

Note also that following the market top in April, the summation index has fallen to new depths, an extreme not seen since the October 2014 correction, while the S&P 500 traveled a wide sideways pattern between 1860 and 2010.

You will similarly note that the NYSE Advance-Decline line (top portion of chart) struggled to achieve new highs while the S&P 500 peaked.  In addition, the middle part of our chart shows that the moving average of the NYSE new highs vs. new lows too has waned since peaking in March.

At Baseline Analytics, we keep track of several key technical indicators and watch for such diverging signals.  Diverging indicators are not ideal for short-term market timing, but they do help to characterize the internal market activity going on behind the scenes of the major market indices.  

At some point, these diverging indicators will resolve their divergence.  Given seasonal weakeness and the aging bull market, we would accept these signals as a caution to preserve capital.

 

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High Probability Trades At Your Fingertips

Baseline Analytics has refined a series of stock and ETF-screening algorithms that pinpoint timely, high-probability trades and investment opportunities.

The results of Baseline Analytics' stock and ETF screens are delivered in a downloadable Excel file.  This file can be sorted to identify various performance and technical criteria to help provide a further edge to your trading and investments.  Instructions are provided to guide you through your review. Our goal is to deliver such opportunities at your fingertips, with minimal research and analysis needed on your end.  We do provide a link to Yahoo Finance for each of our timely picks should you want to delve further into particular equities or ETF's.

As a special offer, Baseline Analytics is providing our latest "Buy Signals" list, developed after the market close on Friday July 10, at no charge.

Subscribers to Baseline Analytics receive our proprietary screens regularly, as well as our TrendFlex family of market trend signals and risk assessment tools.

Click here for the report.

Sign up for a Free Trial and check out our reports and TrendFlex signals for the next 30-days.

 

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Market Tour Update

Here's a quick synopsis of key technical indicators followed daily by Baseline Analytics.

 

Look for resistance on the S&P 500 at 2080.  My biggest concern here was the extreme values reached by VIX and the Put/Call Ratio, as these contrary indicators (at their extremes) failed to spark any significant bounce in the market (so far).  Feels like summer doldrums to me, if not risk-hedging to protect returns.

 

SP07012015

 

As for market sentiment indicators, advance-decline activity as well as the summation index reinforce market weakness. Note how the advance-decline line for the NYSE failed to push to a high while the S&P 500 stretched toward its recent high.

 

Likewise, we are concerned about the "bear market" in the summation index, haven fallen below the bull-bear border of 400 in May and heading slowly toward the lows of past October.

 

sent07012015

 

In summary, I'm not convinced to add to long positions in anticipation of a resumption of the uptrend.  My preference is to hedge and short on any market bounces.  Perhaps it is time to take off for the summer!

 

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Market Tour Update

Here's a quick synopsis of key sentiment technical indicators followed daily by Baseline Analytics.

  

Advance-decline activity as well as the summation index continue reinforce market weakness. Note how the advance-decline line for the NYSE failed to push to a high while the S&P 500 stretched toward its recent high. Breadth has certainly lagged index performance.

 

We contiue to be concerned about the "bear market" in the summation index, despite a modest bounce since the July lows, haven fallen below the bull-bear border of 400 in May and heading slowly toward the lows of past October.

 

breadth07222015

 

The resumption of the uptrend from the July lows is on soft footing. My preference is to hedge long positions and refrain from adding to longs at this time. 

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Recent Thoughts On Trend Following And Long-Term Moving Averages

Written by David Fabian of FMD Capital Management

Technical analysis of the market price in relation to its long-term moving averages can be a helpful tool in deciphering trend direction and areas of potential support or resistance. These never turn out to be perfect inflection points, but can provide guideposts for those inclined to take a more active approach to portfolio management.

More recently, the sideways grind in the major averages has created a narrowing of the percentage difference between the current price and the long-term moving average. I think it’s important to point out this effect and its potential ramifications for trend followers.

Looking at a chart of the SPDR S&P 500 ETF (SPY), it’s easy to see that little forward progress has been made this year. Nevertheless, the 200-day simple moving average (smooth red line on the chart) has been steadily moving higher as it continually adjusts to the higher prices in the market.

SPY

The 200-DMA of SPY started the year near 193 and is now sitting at 204. That represents an increase of approximately 1.8 points per month and has now narrowed the spread to less than 3% below the current price of SPY.

TRANSLATION: Those that use the 200-day moving average as a buy and sell signal would be forced to liquidate their positions if the market fell just 3%.

That’s a very narrow margin of differential that will have to be evaluated in the context of your personal risk tolerance and long-term game plan.

There are three things that could happen from this point:

  1. Stocks blast off from here and give us some breathing room between the price of SPY and the 200-day moving average.
  2. Stocks continue to trade sideways for another 3-4 months until the price of SPY seemingly runs into the 200-day moving average.
  3. Stocks drop and cross below the 200-day moving average, which would ultimately force a decision on reducing exposure or not.

Obviously those that are fully invested would prefer option one. However, the other scenarios are also quite likely as well and must be evaluated accordingly.

The most dangerous situation for trend followers is a quick drop that culminates in a whipsaw back to the highs. This scenario unfolded back in October 2014, when SPY spent four trading days below the 200-day moving average and then quickly recovered. Those that sold likely found it difficult to put money back to work in stocks or were forced to add back at even higher prices.

Nevertheless, that this is trade off in risk that you assume when you implement stop losses to protect your capital. Risk management can be a double edged sword.

My personal preference at this stage is to give stocks more leeway for at least a modest pullback. A 5-6% dip would put SPY near its January lows and make for a more natural zone of support. This level would more than likely carry greater weight than the long-term moving average at this juncture.

Of course, your own personal game plan should be dependent on your current exposure, cost basis, and risk tolerance. Every pullback should be independently evaluated according to how you are positioned heading into it. Many times these are excellent opportunities to put new money to work in areas of the market that have been on your watch list as well.

Looking for new ETF ideas? Check out our library of free special reports on growth and income investing.

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Baseline Analytics Market Tour Update - June 16, 2015

Time to revisit some of the key technical indicators followed by Baseline Analytics to try to make some sense of current market activity.  

As can be seen in the chart below, the S&P 500 broke to the downside through an uptrend extending from December. Recent trading range activity can be broken with a close above 2120.  2080 marks next downside support, with the 2050 area to follow.

Pring's "Known Sure Thing" or KST dipped to negative (bearish) territory during these last few weeks, however, that does not differ much from a similar visit to negative readings in April.  VIX and Put/Call are rather neutral with some mild bouts of excitedness.

MT06162015a

The breadth and internal strength charts (below) are rather neutral, coming off some impressive short term highs. The one concern in this chart is the NYSE Summation Index.  The "400 line" has market bull and bear ranges rather effectively, and this reading has dipped to an extreme (-200) not seen since the 10%+ correction last October.  This indicator bears watching, as it has generally diverged from the uptrend in the S&P 500 since mid-April. 

MT06162015b

Finally, our economic chart contributes a rather neutral perspective on the bull market.  Our bond ratio chart (top portion of the chart below) has settled at support (we normally look for corporate debt to outperform Treasuries as a bullish signal).  Copper vs. Treasuries is also meandering in the doldrums (attempting to break through its 200-day moving average). Copper price is a proxy for economic strength, as the metal is utilized in a variety of industries.  Strength in copper vs. Treasuries again is a sign of positive economic conditions and stock market momentum.  The strong dolar however could be the major cause of copper's weakness.  

We also look at  a ratio of Small Caps vs. Large Caps to assess the broadness of participation in the market trend; a rising ratio suggests increased tolerance for risk and desire to own stocks.  This ratio is rising, a bullish sign. The XLY:XLP ratio tracks the relative performance of Consumer Discretionary stocks vs. Consumer Staples, the former expected to outpace the latter as the economy strengthens.  This ratio is also rising, favoring the risk-on trade.

MT06162015c

In a nutshell, mixed signals underscoring the trading-range character of this market.  Although this recent setback has mirrored other dips along the uptrend, the flattening out of the S&P 500 feels like a potential seasonal topping pattern, one that should not be taken lightly.  It will be interesting to see how the indicators behave should the S&P 500 once again break out to new highs (will they follow the uptrend or diverge)?

 

 

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Mind the Gap - A Visually Compelling Market Timing Signal

At Baseline Analytics, we are on the lookout for profitable (and often unexplainable) technical relationships between peaks and troughs of various market indices and indicators.  Here's one worth mentioning:

One of our TrendFlex indicators is the ratio LQD, the iShares IBOXX Investment Grade Corporate Bond Index, vs. the S&P 500.  We compare the trendline of that ratio to its 34-day exponential moving average.  That comparison gives us our compelling "peak and trough" story."

Note the chart below.  The bottom portion of the chart displays the LDQ:SPX ratio (the top part is the S&P 500). Focusing on the LDQ:SPX ratio, green lines show where the ratio exceeded its moving average at various peak levels. Note that such a peak coincided with a bullish bounce in the S&P 500. Conversely, blue lines show a trough in the ratio, and correspond to a bearish trend change in the S&P 500.

 SPXLQDGap

Today's decline in the S&P 500 (.77% so far) was preceded by a trough in the ratio, as history would suggest.  I won't draw any rationales from this relationship, but just to point out that the consistent performance of this phenomenon can help hedge long or short positions as an overall portfolio management strategy.

Please take a moment to learn about  Baseline Analytics' Premium Services and its thought leadership offerings on Global, Regional and Sector trading and investing opportunities.

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3 Regional Bank Breakouts as Financials Rally

With the prospect of rising interest rates fueling bank profits, regional bank ETF's have broken out, as can be seen by the SPDR Regional Banking Index below:

kre06072015b

After Friday's market close, Baseline Analytics scanned over 9,000 equities to find breakout (or breakdown) stocks.  The breakout results generated a list populated by several regional bank stocks. Here are three noteworthy breakouts.

Lincoln National

LNC, with a home base in Radnor, PA., sports a 1.35% yield and goes ex-dividend on July 8.  Lincoln National has beat earnings estimates 3 out of 4 recent quarters, sports a below-industry PEG Ratio of 1.04 and a PE of 9.6.

lnc06072015

Midwest Financial Group

Based in Iowa City, MOFG sports a 2.0% yield and went ex-dividend on May 28 (so August 28 is the next estimated ex-dividend date). Midwest Financial Group has beat earnings estimates 4 out of 4 recent quarters, sports an above-industry PEG Ratio of 2.0 and a PE of 12.0.

mofg06072015

Lakeland Financial

Based in Warsaw, IN., LKFN sports a 2.39 yield and went ex-dividend on April 22 (so July 22 is the next estimated ex-dividend date). Lakeland Financial has beat earnings estimates 3 out of 4 recent quarters, sports a below-industry PEG Ratio of 1.46 and a PE of 14.6.

 lkfn06072015

The SPDR KBW Regional Banking Index ETF yields 1.41% ($0.62 annual payout) and went ex-dividend on March 20 (next estimated ex-dividend date is June 20). KRE has a PE of 15.  Spreading risk with a diversified regional bank ETF can help to dampen any negative region-specific outcomes while benefiting from bigger rate spreads in a growing interest rate environment.  

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Baseline Analytics Flash Update

Running our nightly scans of over 6,000 equities and ETF's, we discovered a MACD BUY signal on the Dow Jones Transportation Index.  Developed by Gerald Appel in the late seventies, the Moving Average Convergence/Divergence oscillator (MACD) is one of the simplest and most effective momentum indicators available.

Note first of all the divergence in our Dow Theory chart, as the Dow reached new highs while Transports headed lower.  Note the bounce in the Transport index, as it approaches resistance near 8,600.

Dow Theory06052015

The Transports, as seen in the chart below, flashed a MACD bullish cross yesterday.  Truth be told, it has done this before (see mid-April), and it could not hold its gains.

Tran06052015

In Dow Theory, two particular scenarios (among others) can transpire: the Dow can follow the decline in the Transports, or the Transports can catch up with the Dow (while the Dow perhaps languishes in a trading range).  

On the other hand, weakness in the transports can simply be a sign of industry-specific issues, as noted in Barron's.  Underperformance of airlines could be blamed on concerns of industry over-capacity, while flailing rails suggests weakness in commodities markets.  So the divergence between the Dow and the Transports may simply continue.

Nevertheless, this short-term shift in the Transports is worth watching.

 

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Baseline Analytics Market Tour Update - 4/23/15

Time to revisit the Baseline Analytics Market Tour charts to gauge the status of the uptrend. Although the S&P 500 closed off its highs on Thursday, our technical market indicators continue to support the uptrend.

spx04232015

I can't complain about this uptrend.  The chart above looks bullishly delicious from a classic technician's point of view.  Note how RSI (top of chart) barely falls to 30 at its lows, a sign of pullbacks within a strong uptrend.  The S&P 500 is forming an obvious "continuation pattern" triangle, whereby technical traders will see a breakout above the triangle top as a sign of further gains and new highs.

Pring's "Known Sure Thing" shows a firm rebound as it moves into positive territory. On the risky side, VIX is moving a bit too low for comfort. Several times we have noted at Baseline Analytics that VIX moving decisively below its 50-day moving average tends to precede market setbacks.

Market breadth is "gorgeous." Can't complain about the NYSE Advance-Decline line heights or the New Highs vs. New Lows.  The summation index, which is more of a lagging momentum indicator, successfully recovered with a bout of bearishness below 400 as it waltzes higher.

breadth04232015

We look at corporate bonds and their performance relative to Treasuries.  An uptrend is bullish for the "risk-on" trade, which the chart below confirms.  In addition, we see strength in small caps vs. large caps, as well as consumer discretionary stocks vs. consumer staples, all of which reinforce a firming uptrend.  The only downside on this chart is the performance of copper vs. bonds, not so much a sign of economic weakness as it is a sign of a strong dollar and weak commodities.

 eco04232015

So no bearish flavor to make note of in today's Baseline Analytics Market Tour.  If anything, these technical indicators look almost too good, suggesting that, with time (how much time is the question), we could see a pullback as we ride the tail of the risk-on trade. Our TrendFlex Score will help us pinpoint that stage of the market, when it finally arrives.

 

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New Month, New Dividends

Each month, Baseline Analytics scans equities and ETF's to identify dividend-payers with favorable technical characteristics. It's time to scope through the crowd of dividend-paying stocks for the month of April.  

We ran several key technical scans and arrived at a few lists of timely investments.  These lists are captured in our "Wrapper" reports and presented to subscribers.  As a preview to April's dividend-payers, here are a few standouts.

Bullish Trend Wrapper.  Of the 217 stocks and ETF's in our screen, 119 made the cut for trading above their 200-day moving average. We honed the list further to 40 that are trading 10% or higher than their 200-day moving average, representing the strongest stocks in the bunch.

One standout is Darden Restaurants (DRI).  Darden sports a PE of 13, a yield of 3.2%, and increasing earnings estimates.

MACD Buy Signal Wrappers.  MACD stands for "Moving Average Convergence Divergence" and is a popular technical indicator developed by Gerald Appel. Fewer picks here, as 12 made the cut and those were sliced to 7 picks (we dropped 5 that were stuck in a bearish trend).  

Hormel Foods is a standout here.  Hormel (HRL) has a 1.8% yield and raised its full year earnings guidance in February.  

Volume Surge Wrapper.  This is our most popular wrapper, utilized in several Baseline Analytics ETF and stock scans. We seek out stocks that are trading impressively above their moving average of volume.  This could be the most recent 5-day trading volume as compared to a stock's 50-day and 200-day average trading volume, for example, suggesting professional buying.

A standout on this wrapper list is Shoe Carnival (SCVL).  On March 20, Shoe Carnival broke out of a trading range in the mid-20's on high volume, recently closing at 29.  Its most recent 5-day average daily volume was 46% above its 50-day average trading volume. 

You'll need a subscription to access the complete set of Baseline Analytics Wrapper Reports for April.  Access our TrendFlex Score and ETF Signals, StockStash and ETFZone trading and investments ideas, through our Monthly, Quarterly or Annual subscription plans.  You get the full set of Premium Services offered on Baseline Analytics, at one low price.

Wait no longer, click here to subscribe.

 

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Baseline Analytics Market Tour Week Ending 3/20/15 - A Breadth of Fresh Highs

Baseline Analytics TrendFlex Score includes several market indicators focused on internal market strength.  These breadth indicators exhibited rather lofty jolts on Friday 3/20, hitting extremes that not only reinforce the strength of equities, but that potentially point to some frothiness in the "risk-on" trade.  The charts below depicts several measure of market breadth (all of which are variably-weighted components in the TrendFlex Score).

nyad03202015

The chart above is the NYSE Advance-Decline indicator. Note the strong uptrend maintained above its moving average, pushing to meet up with its high from the beginning of March. No internal weakness here.  As I was seeking published commentary on the NYSE Advance-Decline, I found a rather noteworthy analysis from Greg Schnell, particularly interesting for its chart of the 6-year cycle of the S&P 500. That cycle, which plots a market low in the mid-2015 timeframe, was drawn back in December 2013, and markets have admittedly behaved a bit more bullishly since.  Also note Greg's reference to the "80/90's period where we stay nice and strong." Something to keep in mind today.

The next chart is the High-Low Percent of the S&P 500.  This breadth indicator measures the percent of new highs of the S&P 500. It is based on a percent of net new highs (number of new highs minus number of new lows) divided by the total number (500) of stocks in the S&P 500. In all of these charts we plot the 63-day exponential moving average, essentially a three month average of the indicator. The $SPXHLP (which is a 5-day average to smooth out the variability), is reaching toward 12% (its recent high was at 14% prior to the market heights reached at the start of March).  A bearish reading of this breadth indicator is below 0 (a number of market technicians view -2 and lower as a truly cautious level for bulls).

 hlp03202015

Our final breadth chart is the NYSE Advance-Decline Volume line.  This breadth indicator is based on Net Advancing Volume, which is the volume of advancing stocks less the volume of declining stocks. So higher-volume stocks (i.e. Walmart) have a heavier weighting in this calculation, which basically favors the large-cap stocks (the Advance-Decline line in the first chart above favors small to mid-cap stocks). Click here for a primer on AD and AD Volume indicators by Arthur Hill. 

 nyud03202015

We look to market breadth for signals that the uptrend is losing steam.  As fewer stocks participate in a market rally, breadth will begin to flatten and decline.  Note the chart presented by Greg Morris below.  The Nasdaq Composite reached a new high in November 2007, while breadth peaked in March 2007.  

gregmorris03202015

Looking at today's chart of the Nasdaq and its A-D Line (below), it appears that 2015 is moving in the right direction, but the trend in the A-D line prior to February 2015 is a bit non-committal.

nadad03202015

We'll watch this one carefully to assess any continued divergence, as these market breadth indicators remain invaluable to gauging the internal strength of equities.  

Our TrendFlex Score includes four measures of market breadth.  Subscribers receive an update on the TrendFlex Score each week, as it measures the risk of a change in the market trend.

 

 

 

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Baseline Analytics Market Tour Week Ending 3/13/15

This week's 0.86% decline in the S&P 500 did modest damage to technical indicators.  A real positive on the week was the strength in small cap stocks, which have decisively outperformed the S&P 500 since early February:

smallcaps03132015

As for the S&P 500, the index appears more short-term neutral than bearish, while the long term trend remains bullish. Support centers around the 2010 to 2030 area. KST remains positive but suffers from a negative cross at the beginning of March.  VIX appears neutral, however the Put/Call ratio is rather high at 1.21 (above its 50-day moving average of 1.01) and potentially representative of a continued bounce (if not resumption of the short-term uptrend) in the S&P 500. 

Blog03132015

Besides small caps, outperformance has continued for other "risk-on" sectors such as technology and consumer discretionary stocks.  Visit our ETFZone page (subscription required) for our new sector relative strength studies. The next FOMC meeting in March 17-18; be prepared for more rocky activity in the markets. 

 

 

 

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