One of the features of our mini-institutional research product is the Daily S&P 500 and Sector 10-Day A/D Line. At the end of each day, we calculate the net number of S&P 500 stocks that were up on the day (up stocks minus down stocks). Then we add up each of those daily values over the last ten days to come up with the chart below. Whenever the reading gets too high, it indicates the market may be due for a pull back, and whenever it gets to low, it indicates the market may see a bounce in the near future. Last week, we highlighted how the reading for the S&P 500 was the most overbought it has been since November.
Well after two relatively lousy days this week, we revisited where the 10-Day A/D line stands for the market and each of its sectors. Unfortunately, as the chart and table below highlight, the market itself (and most of the sectors) are all currently in neutral territory. While the market can certainly rise from these levels, the risk reward based on this particular indicator is neutral. Looking forward, these reading are likely to continue staying in neutral territory until at least the middle of next week when we drop off some of the big up days from last week.