by Bespoke Investment Group
Below we take a look at breadth as measured by the percentage of stocks trading above their 50-day moving averages in the S&P 500 and its ten sectors. Breadth helps investors see how much the stocks that make up various indices or sectors are participating in rallies or declines. It is generally thought that the better the underlying breadth, the healthier the rally, and vice versa.
We have noted numerous times during the most recent run-up to new highs for the S&P 500 that underlying breadth has been weak. As shown in the first chart below, the percentage of stocks in the S&P 500 trading above their 50-day moving averages made a lower high during the most recent rally. Two prior rallies over the last year saw much better breadth readings. As it stands now, 69% of stocks in the S&P 500 are trading above their 50-days, and the reading is really starting to look like it's rolling over.
Below are breadth readings for the ten S&P 500 sectors. At the moment there is quite a bit of difference between the sectors with the best and worst breadth readings. At 98%, the Energy sector has far and away the highest percentage of stocks trading above their 50-days, and it is really helping the overall market stay afloat. Somewhat surprisingly, the Financial sector has the second highest breadth reading at the moment at 88%. The Industrial sector ranks third best at 81%. .. [..]
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