20130315 Moving Average Breadth
The broader markets continued to power forward this OPEX week. The laggard was once again Technology and the $QQQ. Looking at the breadth below, I want to make a couple of points. First is that divergences are not sealed until the price makes the second (or more) peak. Until then it is just a potential. I heard a lot of talk last week about breadth lagging, which I disagree with. We will make that decision after the next peak. The other think is how these divergences play out. You can see many divergences in the breadth numbers, and most of the time they are good for a quick pullback, but the major topping patterns have another clue to watch for. The grey lines on the charts are my guides. Dean Christians of Montag and Caldwell taught me these. If you study the total universe chart you will see that a peak in the Moving averages below the top line on the 20sma and 50sma usually precede major corrections. It doesn’t have to be a divergence, but a peak near the highs with the MA’s peaking below the upper line.
First the Total universe of 1898 companies posted over the $SPY
Next I split the universe into 10 custom broad sector indexes
Consumer Discretionary (325)
Consumer Staples (91)
Energy (132)
Financials (316)
Health Care (199)
Industrials (252)
Materials (148)
Technology (338)
Telecom (24)
Utilities (73)
These are custom indexes so you cannot invest directly in them, but there are plenty of ETFs available for each sector. For me personally this is another form of relative strength, just with a broader lens .
Good Luck! It is there for you to make.
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