Participation Mixed and Not Encouraging


We like to monitor broad market participation, asking how many stocks are actually taking part in a market advance. A good way to do this is to track the percentage of S&P 500 stocks that are above their 20EMA (short-term), 50EMA (medium-term), and 200EMA (long-term). On the chart below we can see that in October the market began losing participation in the short term, as the percent above 20EMA began trending downward, while the market made progressively higher tops. Currently, with the market near all-time highs, only 61 percent of stocks are above their 20EMA. That's quite a negative divergence.

Longer-term, the stocks above their 200EMA indicator is near all-time highs as well, and seems to confirm the price highs, but that's not necessarily good news. Confirmations, unfortunately, do not convey useful information. Okay, they do tell us that market internals are in gear with price, but that doesn't mean that prices won't reverse in spite if it. In early-2018 internals were strong in all time frames, but the market ultimately entered a pretty strong decline.

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CONCLUSION: Market participation has deteriorated significantly in the short term, with only 61 percent of S&P 500 stocks participating in the current rally. While the stocks above 200EMA indicator is still strong, we need to remember that it takes longer to turn that indicator down, and also that confirmations are no guarantee against price reversals. The short-term indicator is giving us a warning, which we shouldn't ignore.

Technical Analysis is a windsock, not a crystal ball.

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Carl Swenlin
About the author: is a veteran technical analyst who has been actively engaged in market analysis since 1981. A pioneer in the creation of online technical resources, he was president and founder of, one of the premier market timing and technical analysis websites on the web. DecisionPoint specializes in stock market indicators and charting. Since DecisionPoint merged with in 2013, Carl has served a consulting technical analyst and blog contributor. Learn More
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