≈ It Doesn’t Always Bring Destruction ≈
One of my favorite ways to measure the percentage of stocks in an uptrend is to use the 50-day moving average. Those above it are bullish, and those below it are bearish. The healthiest markets see widespread strength across all sectors. The more uptrending stocks in each sector, the better. With the recent fallout in cyclicals, we’ve seen a sharp deterioration in market breadth. Leadership is narrowing, and fewer and fewer stocks are powering to new highs.
Do you know what percentage of the S&P 500 members are above their 50-day moving average right now?
It’s lower than you’d think, given the Index is sitting near a record high. But there are two ways for a breadth divergence like this to resolve itself.
First, the laggards could eventually drag the major indexes lower. And that’s certainly what bears are hoping for. Or, they don’t.
Second, money rotates back into the likes of Materials, Financials, and Energy. The participation broadens, and the breadth divergence disappears. This would be the best outcome for bulls.
Remember this next time some nervous nelly points out a spooky divergence. They don’t all resolve themselves with asset prices falling.
Chart of the Day
Stocks above 50-day MA
Video of the Day
Trading Glossary: What is the 50-Period Moving Average
In this video, you’ll learn about the 50-day or 50-period simple moving average, which can help you to identify and confirm intermediate trends, which can help you trade stocks and options with more discipline and help you attain more consistent profits with additional training and education.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Trade Masters 7 PM EST
Join us every Wednesday at 7 PM EST on YouTube as the Coaches go over trade ideas from the Trade Master’s crew!
Cash Flow Condors MasterMind Group 8:30 PM EST
The Condors for Cash Flow system is a high probability option selling strategy designed to generate passive income over time. Join us tonight to go over next month’s orders.
Coaching Program MasterMind Group Replay
If you are a Coaching student and missed the last meeting where Coaches Tyler Craig and Greg Holmes talked about Portfolio Structure or would like to watch it again, check it out here.
The Coaches Show Replay
If you missed last night’s episode where Coaches Gino Poore and Greg Holmes talked about How to build a watchlist or would like to watch it again, check it out here.
Trading Justice Episode 433: Market Skyline
In this episode, the coaches analyze the current market conditions across stocks, commodities, and crypto-currencies. Stocks continue to push all-time highs, as the market remains bullish. This week will be busy from a news perspective, as earnings season begins for the 2nd quarter as companies like JP Morgan, Goldman Sachs and Citigroup, and Taiwan Semiconductor report, among others. Disney had big results from its movie debut ‘Black Widow’ over the weekend and reported strong numbers in theatres as well as streaming on Disney+, and Richard Branson takes his first spaceflight on his company Virgin Galactic’s successful launch. Listen in as the coaches analyze all of the news and price action across the markets.
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