20130816 Moving Average Breadth

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20130816 Moving Average Breadth

First week of real damage on the major indexes was accompanied by a big drop in the breadth readings.  It is times like these that can be the toughest to read and certainly warrant some caution.  The tough read comes more from the the breadth than the price action alone.  Looking at the price action the reversals are pretty clear and we made lower lows in many of these charts.  However, the bearish undertones are dampened a bit by the structure of the moving average readings.  Many are showing the 20sma reading at or nearing oversold while the 50sma readings are just now moving into neutral positioning and the 200sma readings holding strong in most places.  More times than not that is ultimately a bullish set up.  That doesn’t mean we have to bottom this week or next.  The 20sma reading can fall further and stay low, but if the larger uptrend is to remain intact, we should keep our eyes open for a bottom to form sooner than later.

Now for the rub. If we don’t find a bottom before the 50sma and 200sma readings start materially deteriorating or we see a very weak bounce in the 20sma readings then we have to consider this an initiation move.  That would suggest this turns into a larger pullback or possibly a major top.  I am not looking for that at this point, but doesn’t make sense to rule anything out in the markets.  As usual, we will let the data speak for itself as we move forward.

I will continue to post both the $SPY and custom index for a few weeks, but will probably drop the $SPY version eventually.

First, the Total universe of 1898 companies posted over the $SPY

8-16-2013 Total Universe with SPYNew Universe Composite Index

8-16-2013 Universe CompositeNext I split the universe into 10 custom broad sector indexes

8-16-2013 Consumer Discretionary

Consumer Discretionary (325)

8-16-2013 Consumer Staples

Consumer Staples (91)

8-16-2013 Energy

Energy (132)

 8-16-2013 Financials

Financials (316)

8-16-2013 Health Care

Health Care (199)

8-16-2013 Industrials

Industrials (252)

8-16-2013 Materials

Materials (148)

8-16-2013 Technology Technology (338)

8-16-2013 Telecom Telecom (24)

8-16-2013 Utilities

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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(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
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About Author


is a Chartered Market Technician (CMT) and Certified Financial Planner (CFPr) in Greensboro Georgia (Outside Atlanta). Founding partner of Barber Lackey Financial Group, LLC, a Registered Investment Advisor. However, this blog is not affiliated with BLFG and does not make recommendations to buy sell or hold any securities.