Indices stumble as US virus cases rise
Bullish momentum has been fading across markets, as investors begin to fret that US virus cases are rising dramatically.
Has the bears’ moment finally arrived? The US 500 has lost momentum over the past month, and despite some recovery in early trading it has yet to resume its move higher. From the charts below, it looks like indices will continue to struggle for the time being, although it is perhaps premature to assume that we are now firmly set on a course to revisit the March lows.
Breadth took a hit yesterday, with NYAD dropping back below its 13-day EMA and MACD continuing to push lower. Such drops have been brief over the past three months, but at some point the market will likely endure a more sustained correction. Bulls will want to see NYAD reverse and move higher.
The 10-day MA of the total put/call ratio has continued to climb, and as in previous instances this has proved to be a negative development for indices. The 10-day MA needs to reverse to signal a revival in bullishness so for the time being the short-term outlook is bearish.
The percentage of stocks above their 20-day SMA has fallen to its lowest level since March. Previous instances such as in August and October 2019 and then in February/March 2020 has seen this reading drop sharply, and it has taken several days or even weeks for a low to form. Thus we should be cautious about expecting an immediate rebound similar to earlier in this rally, particularly now that NYAD is definitively declining and the put/call ratio is rising.
As noted earlier in the week, the percentage of stocks at 10-day highs (smoothed with a 10-day MA) remains at a low level relative to history. This is perhaps the one to watch for a turn higher, as previous instances have proven to be good indicators that a low is in. For now, however, this favours the bears.
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