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The S&P 500 just lately moved above its February excessive to increase its uptrend, however all shouldn’t be effectively below the floor. Fewer shares are collaborating within the Could advance and a key breadth indicator fashioned a bearish divergence. Bearish divergences type when value data the next excessive and an indicator fails to substantiate by forming a decrease excessive. Bearish divergences in breadth indicators present that participation is waning. Fewer shares are collaborating in an advance. This undermines an advance and makes the market susceptible to a decline going ahead. This was coated in Wednesday’s report and video at TrendInvestorPro.
The chart under reveals the S&P 500 (foremost window) forging increased highs from February to late Could (inexperienced arrow-lines). Larger highs are optimistic, however the bother begins once we look below the hood. The indicator window reveals the proportion of S&P 500 shares above the 200-day SMA. This indicator exceeded 75% in early February, however didn’t make it again above 65% in April. The purple arrow-line reveals a decrease excessive from February to April and this can be a bearish divergence. Fewer shares are collaborating within the advance.
Not solely is participation waning, however extra shares are in downtrends than uptrends. The S&P 500 closed above 4200 on Friday and Monday. Regardless of one other increased excessive, fewer than 50% of shares made it above their 200-day SMAs. Presently, some 38.2% of shares are above their 200-day SMAs and this implies 61.8% are under. The vast majority of shares within the S&P 500 are in downtrends and this argues for warning going ahead.
TrendInvestorPro coated waning breadth and extra in Wednesday’s report and video. This month we launched a quantified trend-momentum technique that trades stock-based ETFs. The ultimate half shall be revealed on Thursday, together with a sign desk. Click on right here for quick entry.
Normalized-ROC, the Pattern Composite, ATR Trailing Cease and 9 different indicators are a part of the TrendInvestorPro Indicator Edge Plugin for StockCharts ACP. Click on right here to take your evaluation course of to the following degree.
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Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic method of figuring out pattern, discovering alerts inside the pattern, and setting key value ranges has made him an esteemed market technician. Arthur has written articles for quite a few monetary publications together with Barrons and Shares & Commodities Journal. Along with his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Enterprise College at Metropolis College in London.
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