Back to Previous High…. Now What?

Well the equity bulls have been able to kick the crap out of the bears over the last couple of weeks, taking us to a new closing high in the S&P 500 ($SPX). We’ve gotten confirmation with small caps ($IWM) breaking its May high, semiconductors ($SMH) hit a new high, and the Dow taking out its May high as well. These are all things we want to see in order to have confidence in price continuing to rise.

But that’s not all! I tweeted out the chart below this morning but I thought it’s worth posting here as well. While we are getting the above mentioned confirmation in the other indices, it doesn’t appear we are getting the individual stock participation we’d like to see. As the chart below shows, the number of stocks advancing minus declining, the NYSE summation (a running total of McClellan Osc. values which also looks at advancing and declining stocks), and the percentage of stocks above their 50-day moving average are all below their May highs – not confirming the recent strong price action.

It’s not the end of the world to see breadth not expanding at the same clip as price but it is concerning. It won’t be too surprising to see some consolidation here, but breadth needs to pick up for bulls to stay in control. The next target higher would be the intraday high of 1687 but with the futures flat this morning it seems we must first still contend with 1670.

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