Sector Breadth Strong

Several measures of market breadth have been showing strength recently as we noted in yesterday’s Sector Snapshot. Over 80% of S&P 500 stocks trade above their 50-DMAs, more than half are overbought (at least two standard deviations above its 50-DMA), and over 20% of S&P 500 stocks reached new 52-week highs yesterday. Additionally, shorter-term breadth as measured by the 10-day advance-decline line has also been strong. Pretty much across the board, every sector’s 10-day A/D line has tipped into overbought levels. That doesn’t apply to only Consumer Staples and Real Estate which have more modest readings, though breadth for these sectors has still been positive recently. At the moment, Materials, Health Care, and Financials are the most overbought sectors by this measure. Overall, the sharp moves higher in the 10-day A/D lines does flash a warning sign for the very near term that things are running a bit hot.

As previously mentioned, several sectors are reaching new 52-week highs, and given breadth has been strong to match, cumulative advance-decline lines are confirming the moves higher. As shown in the charts below, Consumer Discretionary, Health Care, Industrials, Materials, as well as the broader S&P 500 all closed at 52-week highs last week and so too did those sectors’ cumulative A/D lines. While price did not close at new highs, Tech, Financials, and Communication Services also all saw new highs in their cumulative AD lines. 

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