Breadth Becomes Positive

Below we highlight our trading range and 50-day moving average charts for the S&P 500. The trading range chart highlights historical overbought and oversold levels for the index and the 50-day moving average chart highlights the percentage of stocks in the index that are currently trading above their 50-days.

While the S&P 500 is still struggling below its 50-day moving average and trading far from levels seen in 2007, the percentage of stocks above their 50-days is showing signs of strength. Prior to Friday, more than 50% of stocks were above their 50-days (currently at 46%). This underlying breadth is a big pickup from the range it has been in for a couple of months now and bodes well for the market going forward.

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Below we highlight the 10-day advance/decline line of the S&P 500 Financials sector. This indicator measures the average daily number of advancers minus decliners over the last 10 days. When the indicator moves into the red zone, breadth is considered overbought and vice versa for the green zone. One thing we have noticed for the Financials is that each subsequent low reading has been higher than the previous one. This is a bullish sign for a sector that currently has a lot of unknowns.