Art's Charts

Breadth Remains Bullish, But Small-Caps Show Weakness

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The bulk of the evidence remains bullish, but there were two downgrades based on relative weakness in the technology sector. The offensive sectors are split with the consumer discretionary and finance sectors showing relative strength, but the technology and industrials sectors showing relative weakness. By extension, Nasdaq performance has been flat since April, which is essentially neutral. This means the only negatives in the market are the relative performance metrics represented by the last three indicator groups on the table. The overall trends remain up and the breadth indicators clearly favor the bulls right now. The AD Lines and AD Volume Lines have been in uptrends since June and new highs are easily outpacing new lows.

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  • AD Lines: Bullish. The Nasdaq AD Line broke out in early September and broken resistance turned into support as the indicator bounced this week. The NYSE AD Line hit a new 52-week high last month and remains in a clear uptrend.
  • AD Volume Lines: Bullish. The Nasdaq AD Volume Line remains in a large bearish divergence, but the trend since early June is up and the late August low marks key support.  The NYSE AD Volume Line remains in a clear uptrend since June and the late August low also marks key support. 
  • Net New Highs: Bullish. Nasdaq and NYSE Net New Highs contracted the last few weeks, but remain positive and bullish overall.
  • Bullish Percent Indices: Bullish. Eight of the nine sector BPIs remain above 70%. The Technology Bullish% Index ($BPINFO) is the "least strong" with a 62.03% reading. The Nasdaq BPI is also relatively low at 59.26%.
  • VIX/VXN: Bullish. The S&P 500 Volatility Index ($VIX) and the Nasdaq 100 Volatility Index ($VXN) bounced near the 15% level in mid August and mid September, but remain in downtrends overall. Low volatility means the fear-factor is low and this means the propensity to sell is diminished.
  • Trend-Structure: Bullish. DIA, IWM, MDY, QQQ and SPY recorded 52-week highs in September and pulled back over the last 2-3 weeks. So far, this is just a pullback within a bigger uptrend.
  • SPY Momentum: Bullish. The Aroon Oscillator (20) has been positive since mid June. MACD(5,35,5) has been positive since late June. RSI remains above the 40-50 support zone.
  • Offensive Sector Performance: Neutral. XLY continues to show relative strength. XLF perked up this week and is starting to outperform. XLK and XLI remain the two drags. 
  • Nasdaq Performance: Neutral. The $COMPQ:$NYA ratio has been flat since April and techs lagged in September. Take out Apple and Google, and the performance would be even worse.
  • Small-cap Performance: Bearish. The $RUT:$OEX turned down in mid September and remains in a bigger downtrend since February. 
  • Breadth Charts (here) and Inter-market charts (here) have been updated.
This table is designed to offer an objective look at current market conditions. It does not aim to pick tops or bottoms. Instead, it seeks to identify noticeable shifts in buying and selling pressure. With 10 indicator groups, the medium-term evidence is unlikely to change drastically overnight.

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Previous turns include:

Positive on 6-July-12
Negative on 18-May-12
Positive on 30-December-11
Negative on 16-December-11
Positive on 3-December-11
Negative on 23-November-11
Positive on 28-October-11
Negative on 5-August-11
Neutral on 29-Jul-11
Positive on 30-Jun-11
Negative on 17-Jun-11
Positive on 25-Mar-11
Negative on 18-Mar-11
Positive on 3-Sep-10
Negative on 13-Aug-10
Positive on 6-Aug-10
Negative on 24-Jun-10
Positive on 18-Jun-10
Negative on 11-Jun-10
Positive on 5-March-10
Negative on 5-Feb-10
Positive on 11-Sept-09
Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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