The S&P 500 and the other US large-cap indexes have continued to grind to new highs all year, completely unphased by any of the deterioration in breadth beneath the surface.
But, when looking at the global stage, things are different…
In this post, we’ll look at the current state of market breadth around the globe and discuss whether internals are supporting the new highs in many international indexes.
It's always a worrying sign when price is making new highs at the index level with a lack of confirmation from internals. But that simply isn’t the case for ex-US equities these days.
In fact, it’s just the opposite, as we’re seeing our breadth metrics support and confirm the recent price action on a global scale.
Here we’re looking at the percentage of developed and emerging markets above their 50-day moving averages:
We saw periods of weakness in March and July for both developed and emerging markets while the All Country World Index was at new highs. This is illustrated by both indicators dropping below 40% during those months.
However, the percentage of global markets above their 50-day moving averages has recently turned back up in the intermediate term, with a steep rise back into bullish territory.
These kinds of breadth improvements could provide a strong foundation on which to build a sustained rally.
We’re also seeing a ramp up in the number of global markets making new highs, which is another data point that speaks to strong participation beneath the surface:
Thirty-two percent of the MSCI global markets are at 52-week highs, the highest level we’ve seen since June.
To put things in perspective, six weeks ago it was at just 2%...
Now that's what we call breadth expansion!
Currently, we can’t see any signs of weakness in new lows or any other near-term internal indicators we monitor.
And, with broadening participation around the globe, we see little reason to doubt these new highs from many international indexes
As always, we’ll continue to monitor the new data as it comes in each day, and we’ll let you know if anything changes. For now, things are setting up nicely for the bulls.
Premium Members can find plenty more in this week's Breadth Report below...
