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Market Internals Grow Tired

advance-decline1

Its Sunday afternoon and as usual I am scanning the market for insight on what might impact us in the coming week. I thought it might be interesting to check on the breadth indicators (the number of companies with stock prices moving higher compared to the number moving lower).

You can see on the chart above that the blue line is in a pattern of making lower highs and is poised to cross the red line, which is also making lower highs. I have also included the S&P 500 index which you can see is drifting sideways to slightly higher.

The blue and red lines represent the market’s breadth, which is weakening in spite of the sideways to higher drift in the average.

Generally, when you see this happening, the market is setting up for a correction – maybe small maybe large, the indicator doesn’t show that.

If the blue line continues down past the red line, that provides a sell signal for this indicator.

Mark