More S&P 500 stocks are in downtrends than uptrends.
37.3% are in downtrends… and 34.3% are in uptrends.
Has the environment switched? Maybe.
Here is the chart:
(right-click and open image in new tab to zoom in)
Let's first break down what the chart shows:
The blue line in the top panel shows the price of the S&P 500 index.
In green is the % of S&P 500 stocks above both their 200-day and their 50-day moving averages, indicating a longer-term uptrend.
In yellow is the % of S&P 500 stocks above their 200-day but below their 50-day moving averages. This indicates a longer-term uptrend but a short-term mess.
In red is the % of S&P 500 stocks below their 200-day and below their 50-day moving averages, indicating a longer-term downtrend.
The Takeaway: This chart is a great way to visualize the current market environment and track trends beneath the surface.
Currently, over one-third of S&P 500 stocks are in a downtrend. The last time we observed the number of stocks experiencing downtrends outnumbering those in uptrends was on May 29 of this year. This lasted only one day and occurred when the S&P 500 index was near all-time highs; afterwards, the market continued to march higher.
We haven't observed this many stocks in the S&P 500 in a downtrend since November 13 of last year. My main concern is whether this change in the market environment will continue to persist over a longer period, unlike what we experienced in May.
Will this environment change stick? I have no idea… I don't own a crystal ball! But this is why it's so important to adapt to changing markets.
The way I learnt it was to leave your confirmation bias at the door!
Grant Hawkridge | Chief Aussie Operator, All Star Charts
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