AT40 = 29.6% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 30.0% of stocks are trading above their respective 200DMAs
VIX = 21.3
Short-term Trading Call: neutral
Commentary
The technical damage in the stock market continues to spread as the countdown to “hedge fund d-day” nears an end.
AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, sank for the fourth of the last five trading days. My favorite technical indicator closed just below 30% in what looks like a tentative approach toward oversold trading conditions. AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, closed right at 30.0% and looks ready to return to the lows of the last oversold period.
The declines of the breadth indicators are so ominous because the major indices suffered major 200DMA breakdowns and confirmed them with follow-on selling. The S&P 500 (SPY) lost another 0.8% and closed at its 4th lowest point since the selling began in October. The index last traded at this point on October 31st when the stock market was just beginning to lift off the lows of the last oversold period. At that time, AT40 sat all the way down at 16.1%. So the “good news” is that the selling this time around is much more concentrated (see the chart of Apple below).
The S&P 500 (SPY) dropped further confirmed its 200DMA breakdown with a 0.8% loss.
The NASDAQ and the Invesco QQQ Trust (QQQ) ominously closed at their SECOND lowest point since the selling began in October. It seems a retest of the recent lows is right around the corner. The market REALLY needs a higher low here!
The NASDAQ lost another 0.9% on its way to what looks like a test of the October lows.
The Invesco QQQ Trust (QQQ) lost another 0.8% and further confirmed its 200DMA breakdown. Next up, the October lows?
Small-caps in the form of iShares Russell 2000 ETF (IWM) never even came close to breaking out above 200DMA resistance. Based on October’s volatility, IWM is just another trading day away from retesting the recent lows. This trading action has disappointed me the most as it positions IWM very bearishly and invalidated one of my key trades coming out of the last oversold period.
The iShares Russell 2000 ETF (IWM) lost another 0.7%. Like its tech-laden counterparts, IWM looks ready to test recent lows any day now.
The Financial Select Sector SPDR ETF (XLF) confirmed 50DMA resistance on Monday and followed through today with a 1.4% loss. Yet, XLF does not look quite ready to test recent lows. So on a relative basis, XLF finally looks “better” than the major indices.
