There Are Just Less Stocks In Uptrends

This is a market of stocks after all. So if the major averages are going higher, then you need participation across the board. You can't have just a few names heading higher and expect the S&P500 to rally another couple of hundred points.

Tonight on CNBC Fast Money we're going to talk about the percentage of S&P500 stocks that are trading above their 200 day moving average. If a stock is above its 200 day, it's probably not in a downtrend right?  It's probably in some sort of constructive trend. So I like to use this as a good gauge of the overall health of the market.

Back in early May, as the S&P500 was breaking out above 1600 I loved the market and expected it to go higher. One of the reasons was the expanding list of stocks in uptrends (or above their 200 day moving average) - Cick here to see the explanation in my CNBC appearance.

But over the last few months, as the market has made new highs (and then failed quickly each time), there has been less participation. In other words, with each new high in the S&P500, less stocks are in uptrends. Here is the chart:

We'll get into much more detail this afternoon on CNBC Fast Money and talk about how to best take advantage of this divergence in terms of both longs and shorts in the stock market. So make sure you tune in!

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Tags: $SPX $SPY $ES_F