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Report Headlines
- Zweig Breadth Thrust Remains Active (bullish)
- 5/200 1% Cross for SPY Remains Active (bullish)
- S&P 500 Breadth Improves, but Remains Majority Bearish
- QQQ and Nasdaq 100 Breadth are Majority Bullish
- S&P 1500 Breadth Improves, but Remains Majority Bearish
- Yield Spreads show No Stress in Credit Markets
- Fed is Behind the Curve and On Hold
- 10-yr Yield Extends Lower after Break Down
Breadth Improves within the S&P 500 and S&P 1500
The majority of indicators remain bearish, but breadth continues to improve. First, the S&P 500 EW ETF joined SPY and QQQ with a close above the upper Bollinger Band (125,1) this week. Second, the percentage of S&P 500 stocks above their 200-day SMA exceeded 60% for the first time since February. Third, the other breadth indicators in the S&P 500 and S&P 1500 surged the last five days. Further strength would flip more of these indicators bullish. Stay tuned…
Elsewhere, the Zweig Breadth Thrust remains active since April 24th and the SPY 5/200 %Differential exceeded 1% on May 12th. Yield spreads continue to narrow and show no signs of stress. The 10yr T-Yield extended its decline, which is helping small-caps, mid-caps and cyclical groups.
Technical Event Timeline
- May 15th – Bullish Cross SPY 5/200 day %Difference > 1%
- May 12th – SPY/QQQ Gap above 200-day SMAs
- April 29th – Bullish Thrust S&P 1500 %Above 20-day SMA
- April 24th – Bullish Zweig Breadth Thrust
- April 4th – Capitulation
- March 13th – Long-term Breadth and Trend Indicators Majority Bearish
Zweig Breadth Thrust Remains Active
A Zweig Breadth Thrust triggered on April 24th and SPY also moved above the lower Keltner line (65,2,65). As laid out in this strategy report, the breadth thrust is bullish as long as SPY holds the lower Keltner line. Five consecutive closes below the lower Keltner line would negate the Zweig Breadth Thrust.
5/200 1% Cross Remains Active (bullish)
The chart below show SPY with the 5-day SMA, the 200-day SMA and the Percentage difference between the two in the indicator window (Percent above MA(5,200,1). A bullish signal triggers when Percent above MA crosses above +1% (blue lines) and the bearish signal triggers with a cross below -1% (pink lines). As with all trend-following indicators and moving average crosses, there will be whipsaws (bad signals) and extended trends (good signals). The 5-day moved more than 1% above the 200-day SMA for a bullish trend signal on May 15th. This signal remains valid until the 5-day is more than 1% below the 200-day SMA. See this research report on the 5/200 day SMA cross for SPY, QQQ, MDY and IJR.
This indicator is one of eleven in the TIP Indicator Edge plugin for StockCharts ACP.
S&P 500 Breadth Improves, but Remains Majority Bearish
Breadth improved over the last five days as SPX %Above 200-day SMA surged above 60% (61.20%). Previously, SPY broke above the upper Bollinger Band to signal a long-term uptrend on June 24th. Two of the five indicators are bullish, which means only one more bullish signal is needed to turn the group net bullish. Here are the three to watch. SPX %Above 150-day SMA surged to 67.6% and needs to clear 70%. SPX %Above 100-day SMA surged to 73.40% and needs to clear 80%. SPX High-Low Percent surged to 6.8% and needs to clear 10%. See the blue/pink arrows and dates for signals.
About the Major index ETFs and Breadth Signals
The top window on each breadth chart shows the corresponding major index ETF with Bollinger Bands (125,1). An uptrend signals when the ETF breaks above the upper Bollinger Band and a downtrend signals with a break below the lower band. The index ETFs are the S&P 500 SPDR (SPY), Nasdaq 100 ETF (QQQ) and S&P 500 EW ETF (RSP).
Each index has four breadth indicators. SPY uses S&P 500 breadth, QQQ uses Nasdaq 100 breadth and RSP uses S&P 1500 breadth.
- The percentage of stocks above the 200-day SMA triggers bullish with a move above 60% and bearish with a move below 40%.
- The percentage of stocks above their 150-day SMAs triggers bullish with a move above 70% and bearish with a move below 30%.
- The percentage of stocks above their 100-day SMAs triggers bullish with a move above 80% and bearish with a move below 20%.
- High-Low Percent triggers bullish with a move above +10% and bearish with a move below -10%. High-Low Percent is the percentage of stocks making 52-week highs less the percentage making 52-week lows.
These bullish/bearish signal thresholds are designed to identify significant changes in the stock market (bull market or bear market). As trend-following signals, they will lag and there will be whipsaws. Long-term, these signals keep us on the right side of the market. The idea is to be invested during bull markets (risk-on) and in cash during bear markets (risk-off).
QQQ and Nasdaq 100 Breadth are Majority Bullish
The majority of indicators, four of five, are bullish as Nasdaq 100 stocks continue to lead the market. QQQ is trading near a new high. Over 70% of Nasdaq 100 stocks are above their 200, 150 and 100 day SMAs. NDX High-Low Percent is dragging its feet at bit at +6%, but has been positive since mid May. This means new highs outnumber new lows and this is bullish.
S&P 1500 Breadth Improves, but Remains Majority Bearish
RSP price and S&P 1500 breadth also improved, but the majority of indicators remain bearish. Most recently, RSP broke the upper Bollinger Band on June 30th for a bullish trend signal. S&P 1500 %Above 200-day and %Above 150-day moved above 50% for the first time since February. S&P 1500 %Above 100 surged to 69.60% and High-Low Percent hit +5.2%. These are strong improvements and further follow through would lead to bullish signals. See the blue/pink arrows and dates for signals.
Yield Spreads show No Stress
The chart below shows SPY, the Junk Bond Spread ($$HYIOAS) and the BBB Bond Spread ($$BBBOAS). The Junk Spread and the BBB spread fell back to their March levels in mid May and worked their way lower the last two months. Both are below their 200-day SMAs. This narrowing shows confidence in the credit markets and is bullish for stocks. The pink lines mark levels to watch for an upturn (widening) that would be negative for stocks (3.5 on the Junk Spread and 1.25 on the BBB spread).
The yield spread is the difference between the Junk Bond Yield or BBB Bond Yield and a comparable Treasury Bond Yield. Junk and BBB bonds represent risk assets, while Treasuries represent relative safe-havens. The spread is the risk premium for holding the riskier assets. Narrow/narrowing spreads show confidence and this is bullish for stocks. Wide/widening spreads show stress and this is negative for stocks.
Fed on Hold and Behind
The top window shows the Fed Funds Target Rate ($$FEDTGT) and the 2-yr Treasury Yield ($UST2Y). $UST2Y typically leads the Fed Funds Rate. Notice how $UST2Y turned up in late 2021, well ahead of the tightening cycle. Also notice how it turned down in summer 2024, ahead of the easing cycle. $UST2Y remains below the Fed Funds Target Rate and this suggests that the Fed is behind the curve. The middle window shows the 3-month Treasury Yield ($UST3M), which also tends to lead the Fed. $UST3M has been range bound between 4 and 4.5 percent for 2025, which means the Fed is on hold. A break from this range will provide the next directional clue for the Fed.
Several factors influence short-term Treasury yields, but they are still closely aligned with Fed policy and often lead the Fed. This means the yield often peaks (troughs) and turns down (up) before the Fed starts to lower (raise) rates. We use the 3-month Treasury yield to identify current Fed policy and anticipate the next Fed move
10-yr Yield Extends on Break Down
The next chart shows the 10-yr Treasury Yield ($UST10Y) as a line plot to filter out some of the noise. First, there is a long-term downward bias with a lower high and lower low sequence over the last two years (pink dashed lines). Second, $UST10Y broke down in February and fell to 4% in April. Third, the April-May bounce to 4.6% formed a rising wedge and lower high, making this a counter-trend bounce. $UST10Y broke down last week with a move below 4.35%. Re-evaluation resistance is at 4.55 (June high plus a buffer).
The 10-yr Treasury Yield is the most important benchmark for long-term rates and mortgages. The bottom window in the chart above shows $UST10Y with the EW Consumer Discretionary ETF (RSPD). Several factors influence long-term Treasury yields: growth expectations, inflation expectations, government debt levels, tariffs and foreign bond holders. The 10-yr Treasury Yield typically falls when the economic outlook dims and/or inflation expectations rise. Conversely, the yield typically rises when the economic outlook is bright and/or inflation expectations fall.
