Monday, November 18, 2013

What's wrong with this picture?

I find the set of charts below to be a bit odd and of some concern. The S&P 500 Index has recently surged to new highs and yet none of the nine major sector SPDRs have attained a new high relative to the Index. Industrials (XLI) are close, days ago hitting a new relative return high, but have since retrenched. Consumer Discretionary (XLY) also registered a new relative high near the start of this month, but has yet to do so again with the S&P 500's latest move. 

I fully understand this observation is very short-term in its focus as the S&P 500 broke to new highs only last week and relative performance can lag initially before taking hold and establishing a trend. In other words, these relative charts could look quite different in another week or two. 

However, I've already noted that cap size is not confirming the market's latest rise and based on the charts below there's so far not much definitive sector leadership. And I'd also mention that with this new S&P 500 high the percentage of NYSE stocks above their 50-day moving average has risen to 69% -- a seemingly elevated number until you consider that during the prior new high in the Index the number was near 85% and with the S&P 500 high prior to that the number was 75%.

I continue to let prudence dictate at this juncture, meaning I remain cautious and hesitant near-term. For me to return to bull mode will require better resolution of these non-confirming red flags.


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