Stocks recording new 52-week highs are the leaders and a key component to broad market strength. Small-caps are doing their part with plenty of new highs, but large-caps and mid-caps are lagging in this category.
The S&P Small-Cap 600 moved to a new 52-week high this week and is leading the major stock indexes. In contrast, the S&P 500 is 5.7% below its January high and the S&P Mid-Cap 400 is around 3% below its January high. In Dow Theory terms, one could argue that large-caps and mid-caps are not confirming strength in small-caps.
New 52-week highs in the S&P 500 and S&P Mid-Cap 400 are also lagging new highs in the S&P Small-Cap 600. This is a concern because it shows lack of leadership within large-caps and mid-caps. An expansion of new highs is needed to expand leadership and set the stage for new highs in the indexes. Let’s define the key levels to watch going forward.
The chart below shows the High-Low pairs for these three indexes. 52-week highs are positive and green, while 52-week lows are negative and red. The blue lines are set at +10% and -10% (+50/-50 for $SPX, +40/-40 for $MID and +60/-60 for $SML).
S&P 500 New Highs (!NEWHISPX) and S&P Mid-Cap 400 New Highs (!NEWHIMID) have not exceeded their 10% levels since mid-March, and these are the levels to watch going forward. A break above these 10% levels would show expanding leadership and suggest that the May rally is broadening. This would open the door to new highs in the underlying indexes.
The lower window shows S&P Small-Cap 600 new highs (!NEWHISML) exceeding +60 three times in the last two weeks. This total is still short of the levels seen in early October and late November, but it is clearly more bullish than bearish and confirms that small-caps are the leading.
On Trend with Arthur Hill
Be sure to catch On Trend every Tuesday at 10:30 AM on StockCharts TV. The show repeats immediately afterward at 11 AM ET and again throughout the week. There is also a video archive on Youtube. StockChartsTV and the video archives are available to everyone.
Highlights from On Trend for Tuesday, May 15th (click here to view)
- Ranking Sectors by High-Low Percent
- Sector SPDR Chart Analysis (big wedges)
- Oil and Energy-Related ETFs Continue to Work
- 10-yr T-Yield Turns Back Up
- Winners and Losers in Rising Rate Environment
- Stocks: TSLA, DHR, NKE, ROST, SYK, UNH
Plan Your Trade and Trade Your Plan.
- Arthur Hill, CMT
Senior Technical Analyst, StockCharts.com
Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill
