What’s The Stock Market Breadth Telling Us?

What’s The Stock Market Breadth Telling Us?

The US stock market saw a decent bounce back yesterday as some of the heavy selling pressure eased off. Higher inflation remained a major concern among investors and traders, which is boosted by the dovish monetary policy and unprecedented fiscal support.

The Fed is maintaining the view that any increase in inflation is very much temporary but inflation fear continues to create bouts of volatility whenever economic data comes out in the US. On the vaccine front, a major development happened in the US as the CDC announced that fully vaccinated people do not need to wear masks in any settings. However, the situation doesn’t look that rosy everywhere else as Singapore announced one month of lockdown today due to the rise of coronavirus cases.

Asian Markets 

The Asian stock market traded mostly higher on Friday. The Shanghai index advanced by 1.44%. The HSI index increased by 0.91%, while the ASX index increased by 0.70%. The Nikkei index also soared by 2.32%.

Dow Jones and S&P 500: Market Breadth

The Dow Jones’ market breadth gained energy yesterday. 87% of the Dow Jones stocks traded above their 200-day moving average. 

The S&P 500 stock breadth also displayed strength yesterday. 82% of the shares traded above their 200-day moving average. 

Dow Jones Futures Today

The Dow Jones futures broke their 3 day losing streak yesterday and Dow futures are trading higher on the final day of the week. In terms of economic data, investors will be paying close attention to the US Core Retail Sales m/m reading and US Retail Sales m/m. The forecast for Core Retail Sales m/m 0.5% while the previous reading was at 8.4%. The retail sales data is forecasted to come in at 1.0%% while the previous reading was at 9.8%.

The Dow Jones is on track to record some hefty losses for this week after its wild week. On the daily time frame, the Dow’s price has jumped above the 50-day SMA on the daily time frame and this indicates that bargain hunters have started to bag some bargains and if the price stays above this average, then we can say that the sell-off is over. Having said that, it is important to keep in mind that the RSI on the weekly time frame continues to remain in overbought territory and this means if the Dow’s price drops below the 50-day SMA on the daily time frame, we are likely to see another few wild weeks for the Dow Jones.

The near term support is at 31,809, while the resistance is at 34,742.    

Stock Market Rally

The S&P 500 stock index closed higher yesterday; the index advanced by 1.22%. The consumer discretionary sector led the index higher and 10 out of 11 sectors closed lower. 

The Dow index also increased yesterday; the Dow stocks moved the index higher by 1.29%. 12 shares advanced, while 18 shares closed lower. 

The NASDAQ composite, a tech-savvy index, also closed sharply higher by 0.72% yesterday.

S&P 500 Leaders and Laggards: Nucor and Occidental Petroleum

Nucor Corp stock contributed the biggest gain, soaring 5.011%. Occidental Petroleum stock was the largest drag; it fell by 5.613%. The S&P 500 stock index is up 10.84% so far this year.

Dow Jones Leaders and Laggards:  Home Depot and Chevron

Home Depot provided the biggest help for the Dow Jones; it advanced by 2.66%, while Chevron Corp Inc was the largest decliner, it fell by 0.64%.