I missed last week’s post, but it’s at least been a bit quiet given the quarter end and the holiday / general seasonality. Summer is upon us and we’re staring at the second half of the year, maybe some wondering where we’ll go from here with the SPY up %16 on the year already. My guess in the very short-term would be up a bit more, but maybe we don’t end the year this high.
Since the volatility in mid-May we’ve had a seeming change in leadership and though indices have melted upward there’s been some good churn underneath.
I had started a post for the previous week focusing on some market breadth data/indicators, and I think it’s even more worth a look now that indices are starting to look stretch in this last leg, given these can give an indication into how “healthy” this advance is (hint: the more stocks going up the better).
Unfortunately I’m throwing this together last minute, so I’m not getting to dig as deep here as I’d like.
The S5FI / NDFI indices track the percentage of stocks in the S&P 500 / NDX above their 50 day moving average. This and other indices like it offer an idea of market breadth, i.e. how many stocks are actually participating in this rally. In the last week we’ve picked up from some recent lows and now have ~%50 of S&P 500 stocks above their 50DMA, which is a pretty good sign of participation in this rally.
[SPY / S5FI 1y](https://imgur.com/KdWOt9l)
[NDX / NDFI 1y](https://imgur.com/yO7cBra)
And now some charts to show how many (%) stocks within an index are hitting 52-week highs – a helpful indication that it’s not just a few stocks pushing us up :
[SPY / MAHP 1y](https://imgur.com/kc4yDrN)
[NDX / NAHC 1y](https://imgur.com/OYU9KgE)
Another interesting chart to look at is that of SKEW:
[SKEW / SPY 5y](https://imgur.com/izCeWJ4)
**SKEW** is an interesting indicator. Usually ranging from 100 to 150, the former suggests normal perceived market returns and trends toward the latter suggest volatility ahead. Recently SKEW has traded at ATHs, 170+. While historically it’s not been a good predictor of realized volatility as can be seen in the chart, it’s interesting in that it’s a measure of perceived risk in the markets, basically elevated expectations of a black swan event. So while you probably shouldn’t trade on it, it’s a view into market sentiment for the next 30 days.
Now let’s move on to our general chart rundown…
[Sector Compare 1y](https://imgur.com/0h2bf1J)
[Sector Compare YTD](https://imgur.com/iLM4OIq)
And the major indices…
– This recent push back to ATHs in SPY and QQQ seems to have been led by a rotation / leadership back in tech / growth.
– Indicators around participation suggest we’ve got good “breadth” here, meaning it’s a general advance and not just the biggest index components pushing us higher while everything else lags.
– Technically things look good, though possibly starting to look stretched… no reason to doubt this push higher though.
– Not pictured here but VIX remains subdued. Always good to watch for this creeping up though.
– Considering current sentiment, seasonality, and _known_ catalysts, it’s hard to see why we wouldn’t churn higher
– Converse to the previous statement, keep in mind that most often the catalyst which causes the damage is one that we never see.
Not this week…