AT40 = 55.3% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 56.8% of stocks are trading above their respective 200DMAs
VIX = 9.8 (volatility index)
Short-term Trading Call: cautiously bullish
Commentary
In my last Above the 40 post, I noted how the trading action made it hard for me to cling to my cautiously bullish short-term trading call. The stock market answered my criticism with a sudden burst of breadth. Who flipped the switch?
The S&P 500 (SPY) closed May with financials sounding fresh alarm bells. At the time, AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, bounced back from its lows of the day. Yet, AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, showed more signs of fatigue and highlighted the lack of breadth in the S&P 500’s rally.
The breadth finally showed up as June trading kicked off. The S&P 500 sprinted forward two days straight and returned to the top of its upward trending upper-Bollinger Bands (BBs). AT40 came along for the ride with an impressive move from 43.8% to 53.5% on Thursday and a close at 55.3% to end the week. A LOT of stocks woke up over the past two trading days. AT200 moved from 52.6% to 56.4% on Thursday to confirm the return of breadth. Friday was much less impressive with a fractional gain following a large fade from the intraday high.
The S&P 500 sprinted to new all-time highs to start June trading.
The tech laden Nasdaq (QQQ)* sprinted so strongly that its move looks like the early part of a parabolic rise.
While breadth has returned, AT200 (T2107) did not quite erase its on-going breakdown.
Even small caps, the iShares Russell 2000 ETF (IWM), and mid caps, the SPDR S&P MidCap 400 ETF Trust (MDY) stretched out to return to the top of their current trading ranges.
The volatility index, the VIX, set a new 14-year low by closing a tiny fraction lower than its May 8th close. Day-by-day, the VIX is trying to extend the case for a new norm of extremely low volatility.
