S&P 500 Rally Thins And It’s Worrying Market Analysts
By Callie Bost
Trouble is brewing in an indicator measuring how many companies are keeping the stock market aloft in the U.S., just as the Standard & Poor?s 500 Index threatens to give up gains for the year.
About 59 percent of stocks closed above their 200-day moving averages at the end of last week, the lowest percentage in eight months, according to data compiled by Bloomberg. Waning breadth is holding back a version of the equity gauge that strips out market-value biases, the S&P 500 Equal Weight Index, which is down 0.4 percent since March.
So few stocks have been left behind in the American bull market that any sign that breadth is breaking down is viewed with concern by analysts who base trading decisions on charts. To FBN Securities Inc.?s JC O?Hara, the thinning foundation is like a game of Jenga, where each wood block removed increases the chance the tower will fall.
?We?ve seen time and time again when the market makes a new high that the internals are not responding,? said O?Hara, the New York-based chief market technician at FBN. ?For a technician looking at that, that?s a cause for concern. The market is grinding sideways and fewer stocks are moving higher.?