S&P 500 IS TESTING 50-DAY AVERAGE -- OTHER MEASURES OF MARKET BREADTH LOOK WEAKER

S&P 500 TESTS 50-DAY MOVING AVERAGE... Chart 1 shows the S&P 500 trying to find support at its 50-day moving average (blue arrow).    Stocks have entered a seasonally weak period extending from September into October.   And despite the general consensus that stocks are due for a pullback, the selling so far has been pretty well contained.   Some measures of market breadth, however, show more signs of weakness.

% OF STOCKS ABOVE MOVING AVERAGE LINES ARE WEAKENING...While the S&P 500 is holding above its 50-day moving average, Chart 2 shows the S&P 500 Percent of Stocks Above Their 50-day Averages dropping to 55%.  That means that nearly half of S&P stocks have fallen below their 50-day lines.  That suggests that lot more profit-taking has taken place beneath the surface.   Chart 3 shows that the S&P 500 Percent of Stocks Above Their 200-day moving averages has also weakened.   The red line shows that measure dropping to 75%.   That means that a quarter of S&P stocks have fallen below their 200-day lines.   Another measure of market breadth has weakened.

ADVANCE-DECLINE LINE HAS ALSO WEAKENED... The red line in Chart 4 shows the NYSE Common Stock Only Advance-Decline Line declining from its June peak.  By contrast, the black bars show the S&P 500 continuing to advance during that period of time.    That negative divergence is worth paying attention to and may be a warning that the broader market is weaker than the major stock indexes suggest.  The same is true of the lines in Charts 2 and 3.