MARKET BREADTH SHOWS IMPROVEMENT -- BANKS CONTINUE TO HOLD FINANCIALS BACK -- WHILE ASSET MANAGERS HAVE TURNED UP -- INCLUDING BLACKROCK, T. ROWE PRICE, AND INVESCO
% OF STOCKS ABOVE MOVING AVERAGES GAIN... Various measures of market breadth have improved over the last month. Chart 1 shows the S&P 500 percent of stocks above their 50-day moving average rising from an oversold low of 25% during September to 78% this week. That's a big improvement in a relatively short period of time; but it has reached potential resistance in the low 80s. The improvement in Chart 2 is even more impressive.
Chart 2 shows the S&P 500 percent of stocks above their 200-day moving average rising to 75% this week. Going into September, the red line in Chart 2 was stuck below its June high at 68 which formed a negative divergence from rising stock indexes. Since then, the red line has risen to the highest level since February. That puts three quarters of SPX stocks in major uptrends, and reflects a broadening out of the stock market rally.
NYSE COMMON STOCK ONLY AD LINE TOUCHES EIGHT-MONTH HIGH... The traditional NYSE Advance-Decline line has reached a new record. But I prefer the version shown below. Chart 3 plots the NYSE Common Stock Only Advance-Decline Line still trading below its first quarter highs; but it did touch an eight-month high on Monday. That's an encouraging sign if that upside breakout holds. This week's stock pullback has put the black line back below its August high. But its overall trend remains upward.
FINANCIALS STILL LAG BEHIND...Recent rallies in industrial and transportation stocks have helped improve market breadth as well as smaller stocks. Financials, however, continue to lag behind. The daily bars in Chart 4 show the Financial Sector SPDR (XLF) still trading below its June/September highs. An encouraging sign came from last week's move above its 200-day moving average. Today's chart, however, shows the XLF retesting both its 50- and 200-day moving averages. That's an important test. A big part of the financial weakness is coming from bank stocks. Chart 5 shows the KBW Bank Index (BKX) pulling back from a test of its 200-day line, and chart resistance along its August/September highs. It is, however, finding some support at its 50-day line. While bank stocks are holding the financial sector back, some other financial groups are doing better. Like asset managers.
ASSET MANAGERS ACHIEVE UPSIDE BREAKOUT...The dailybars in Chart 6 show the Dow Jones Asset Managers Index rising above its summer highs to reach the highest level in eight months. Its relative strength line in the upper box has turned up as well. Chart 7 shows Blackrock (BLK) surging to a new record. While Chart 8 shows T. Rowe Price (TROW) doing the same. Chart 9 shows Invesco (IVZ) rising to the highest level in eight months. Two other stocks that in the group that may be turning up include Franklin Resources (BEN), and Northern Trust (NTRS). So even though the financial sector has been an underachiever, some of its components are doing pretty well. Which is why it's always a good idea to look at individual industries within each sector.
