When the 20-EMA crosses up through the 50-EMA, we consider it to be an intermediate-term BUY signal (aka Silver Cross, as opposed to the Golden Cross, to be discussed later). A few years ago, we developed the Silver Cross Index (SCI), which shows the percentage of stocks in a given index that have a Silver Cross status. It gives us a clear picture of the number of stocks that are participating in an advance or decline. The chart below shows the SCI for the three indexes that compose the S&P 1500 Index. It is not hard to see the severe negative divergences that exist on all three.
As we would expect, the S&P 600 has the lowest percentage of participation (44%) and has been flat for about six months. The S&P 400 has also been flat, but has a little better SCI reading of 53%. The large-cap S&P 500, still rallying after about 16 months, is strongest, with an SCI of 66%. Applying a little math, we determined that the SCI for the S&P 1500 is 53%. That's really poor and leaves the market vulnerable if current support dries up in the large-cap sector.
When the 50-EMA crosses up though the 200-EMA, it is widely considered to be a long-term BUY signal (aka Golden Cross). The Golden Cross Index (GCI) gives us a longer-term view of breadth and shows the percentage of stocks in an index that have Golden Cross status. While the GCIs for the three S&P 1500 indexes have pulled back somewhat, the pullbacks have been from record-high GCI levels and they still reflect strength in the longer term. The GCI for the S&P 1500 is 83%.
CONCLUSION: While the SCI shows considerable weakness in the intermediate-term, the GCI tells us that the long-term is fairly solid. We interpret this to mean that stocks without a Silver Cross Buy signal are simply languishing rather than completely falling apart. That's a good thing as far as it goes; however, with roughly half of S&P 1500 stocks in a swoon, there is really no cushion left to absorb the next bit of bad news.
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