This Is Still A Stock Picker's Market

This week the S&P500 hit 1800 and the Dow Jones Industrial Average hit 16,000. These numbers make for great headlines. But don't be fooled, participation across individual stocks has not been increasing along with the price of these averages. There are many stocks out there that are not making new highs. I think this chart below tells an interesting story: there are stocks going up and stocks going down. Outside of the major indexes, if you're trading/investing in individual names, this is still a two-way market.

This is a chart of the percentage of stocks in the S&P500 that are above their 200 day moving average. To me, this is a good gauge of whether or not a stock is in an uptrend. The way I see it, if a stock is above its average closing price for the year, it's probably not in a downtrend.

Notice how with each new high in the S&P500, this week included, there are less and less stocks in uptrends:

Sure this may be a problem for the overall health of the market. But divergences can persist longer than most expect. I think what we should take from this is that there are both long and short opportunities out there. If you're not just in the averages, but in individual names, I think this is important to keep in mind.

As far as the overall health of the market, I think it would be really bullish bigger picture if the downtrend in participation is broken to the upside. That would be interesting to say the least.

I'll try to follow up on this post if anything changes.

Tags: $SPY $SPX $DJIA