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What Does The Stock Market Breadth Tell Us?

What Does The Stock Market Breadth Tell Us?

Traders are feeling optimistic despite the fact that we saw a mixed bag of economic data released yesterday in the US. Overall, this week has been pretty good for the US and European markets. We saw US equity indices climbing to a new record high as investors have become a little more comfortable with the idea of QE leaving town. But it has also become very clear that the Fed will not rush into anything as inflation numbers in the US have started to lose their momentum and there are early signs that the recent surge in inflation was transitory. In addition to this, traders also know that the Fed’s asset purchase programme isn’t going to stay forever, and it is likely that the next month’s Fed meeting may be a lively one as the Fed might actually prepare the market for a more hawkish monetary policy.

Asian Markets 

The Asian stock market traded mostly mixed on Friday. The Nikkei index increased by 0.06%. The HSI index decreased by 0.93%, while the ASX index increased by 0.47% of its value. The Shanghai index dropped by 0.35%.

Dow Jones and S&P 500: Market Breadth

The Dow Jones’ market breadth gained more momentum back yesterday. 90% of the Dow Jones stocks traded above their 200-day moving average. 

The S&P 500 stock breadth continues to show more strength. 84% of the shares traded above their 200-day moving average. 

Dow Jones Futures Today

The Dow Jones futures are trading higher today. In terms of economic data, investors will be looking at the Prelim UoM Consumer Sentiment and Prelim UoM Inflation expectations, which are due later in the day today. The forecast for the consumer sentiment is 81.2 while the previous reading for the inflation expectations was at 4.7%. 

The Dow Jones industrial futures have recently broken out of a major consolidation zone. Before breaking out of this zone, the price formed a triple top, a bullish pattern. By looking at the chart, it seems that the Dow Jones Industrial Average may be ready for another serious rally now, which means that we could see the index moving higher by another 1,000 points. There is also no doubt that the bulls are in full control of the price and this is because the price is trading above the 50, 100 and 200-day SMA on the daily time frame. Although, traders may want to adopt a little more cautious approach as well and that is because the RSI is about to enter an overbought zone which may bring a small retracement in the Dow’s price.

The near term support is at 34,561, while the resistance is at 35,581.    

Stock Market Rally

The S&P 500 stock index closed higher yesterday; the index increased by 0.30%. The health care sector led the index higher and 9 out of 11 sectors closed higher. 

The Dow index advanced yesterday; the Dow stocks moved the index higher by 0.04%. 16 shares advanced, while 14 shares closed lower. 

The NASDAQ composite, a tech-savvy index, closed higher by 0.35% yesterday.

S&P 500 Leaders and Laggards: Organon and Western Digital

Organon and Co. stock contributed the biggest gain, soaring 11.92%. Western Digital stock was the largest drag; it fell by 6.505%. The S&P 500 stock index is up 18% so far this year.

Dow Jones Leaders and Laggards: Salesforce and American Express 

Salesforce.com provides the biggest help for the Dow Jones; it advanced by 2.522%, while American Express was the largest decliner, it fell by 1.26%.