The next report will be on Wednesday, January 29th.
The major index ETFs fell on Monday, but breadth actually improved as the average stock held up well. This strength under the hood, and this is positive for stocks outside of the AI infrastructure trade. Today’s report will show advancing stocks outpacing declining stocks and an increase in the percentage of S&P 500 above their 200-day SMA. In short, the broader market is still in good shape.
Major index ETFs Fall, but Average Stock Rises
The major index ETFs finished down on Monday as the S&P 500 SPDR fell 1.4 percent, the Nasdaq 100 ETF plunged 2.91 percent, the S&P MidCap 400 ETF dropped 1 percent and the S&P SmallCap 600 SPDR declined .25 percent. The S&P 500 EW ETF (RSP) was actually up a fraction (.07%). Small-caps and mid-caps held up the best, while large-caps and large-cap techs fared the worst.
Despite declines in the major index ETFs, advancing stocks outnumbered declining stocks. The first indicator window in the chart above shows S&P 500 Advance-Decline Percent finishing at 39.40 percent. This means 70.20 percent of S&P 500 stocks advanced on Monday and 30.80 percent declined (70.2 – 30.80 = +39.40). That is a good day for stocks as a whole!
Despite a 2.9% rout in QQQ, Nasdaq 100 Advance-Decline Percent finished at +10 percent, which means 55 percent of its components were up on the day and 45 percent were down (55 – 45 = 10). This is not a great day, but clearly not a bad day for the average stock in the Nasdaq 100. Thus, Monday was not a bad day for the average stock.
Long-term Breadth Improved on Monday
The S&P 500 SPDR (SPY) fell 1.4% on Monday, but the percentage of S&P 500 stocks above their 200-day SMA ($SPXA200R) rose from 62% to 66% (blue arrow in first indicator window). This means the number of stocks in long-term uptrends increased within the index. This is a good sign because it shows broad strength within the S&P 500 (outside of large-cap tech). In other words, Monday’s sell off did not rock the entire market. Selling pressure was largely focused on the AI infrastructure trade. VST, ANET, CEG, PWR, NVDA and AVGO fell between 15 and 28 percent.
