OVERSOLD STOCK INDEXES ATTEMPT TO STABILIZE NEAR CHART SUPPORT -- BUT BREADTH FIGURES PAINT A WEAKER PICTURE

OVERSOLD MARKET ATTEMPTS TO STABILIZE... After an incredibly volatile week of trading, stocks are in a short-term oversold condition and attempting to stabilize near chart support.  Chart 1 shows the Dow Industrials stabilizing near a flat support line drawn under their June low.   At the same time, the 14-day RSI line in the upper box is bouncing from oversold territory near 30.  The Dow, however, remains below its 200-day moving average, however, which casts the current rebound in a more negative light.  Chart 2 shows a similar situation in the S&P 500 which is attempting to stabilize near its October low while being in a short-term oversold condition.   The SPX is also trading below its 200-day moving average.   The Nasdaq is the weakest of the three major indexes but is also attempting a short-term rebound.   Chart 3 shows the Nasdaq Composite Index trading well below its October low, but finding some short-term support near its May low.  The COMPQ is also the furthest from its 200-day moving average.   So far, this week's rebound is modest in nature and hasn't been enough to repair technical damage done during the month of January.   That damage can be seen more clearly in various measures of market breadth.

ADVANCE-DECLINE LINES BREAK CHART SUPPORT... Shown below are two different measures of market breadth and both paint a negative picture.   Chart 4 shows the more traditional version of the NYSE Advance-Decline line breaking support formed during the second half of 2021 and falling to the lowest level  since last May.   Chart 5 shows the NYSE Common Stock Only Advance-Decline line also breaking chart support and falling to the lowest level since last March.   Those advance-decline lines have a history of leading stock indexes lower at market tops.

MOST SPX STOCKS FALL BELOW 200-DAY LINES... Chart 6 shows another measure of market breadth trending lower.   The solid line shows the percent of S&P 500 stocks trading above their 200-day average falling to the lowest level since the middle of 2020.  It also fell to 45% yesterday which means more than half of S&P 500 stocks have fallen below their 200-day lines.    That's another technical sign that the major trend for stocks has suffered a lot of damage.   And provides another reason why the current oversold rebound needs to be viewed in that longer-range negative context.