The above graphic shows the “risk” sectors
of the SPX. What I find worthy of notice is the percentage of components in
each sector that are above the 5, 10, and 20 DMA.
For example, for the Basic Materials sector
after last Friday 93.3% were above the 5 DMA and after today 86.7% were above
the 5 DMA. The same sector had 80% above the 20 DMA after Friday and 63.3%
above the 20 DMA after today.
Reviewing the other risk sectors shows a similar patter of decreasing numbers
above the key moving averages. This decline in market breadth for the risk
sectors on a day that that the index was flat is frequently a signal that the
market has topped.
While seasonality may keep the index afloat
a couple more days, and news may rekindle the rally, the internal data
certainly is suggesting an imminent move lower as traders are losing their
appetite for taking risk.
After hours on 12/19 we posted a multi-day
Long signal. The SPX has gained 46 points since that signal in five sessions.
While we do not yet have a clear multi-day Short signal, this internal data
would suggest that the Long side is exhausted.
Good night. "Mel"
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