6/12/20 At best, we are due for a correction after the big advance from late March to early June.
At worst, the bear market bounce is ending and the bear market is resuming.
5 Indicator Long-term Breadth Model
After some trial and error, I developed a long-term breadth model using data from Norgate and Amibroker testing software. At this time, this model only uses data from stocks in the S&P 500. In general, models are more less volatile when they exclude mid-caps and small-caps. There is nothing wrong with StockCharts’ breadth data, but I need data going back further than 2010 and signals that can be quantified. Norgate breadth indicators are based on data that is not adjusted for dividends. I suspect that StockCharts uses dividend-adjusted data for their breadth indicators.
This adjustment issue caused me to adjust the bullish and bearish thresholds. With Stockcharts, I was using 60% and 40% as bullish and bearish thresholds for S&P 500 %Above 200-day EMA (!GT200SPX) and S&P 500 %Above 200-day SMA ($SPXA200R). Dividend-adjusted data has an upward bias because the dividends are added back to prices after the fact. To account for this difference, I am using 55% and 45% for my bullish and bearish thresholds when using Norgate %Above 200-day. The list below shows the indicators with their thresholds.
10-day EMA of SPX Advance-Decline Percent: Bullish breadth thrust with move above +30% and bearish thrust with move below -30%
%Above 200-day SMA for S&P 500 Stocks: Bullish with move above 55% and bearish with move below 45%
%Above 150-day SMA for S&P 500 Stocks: Bullish with move above 65% and bearish with move below 35%
%Above 100-day SMA for S&P 500 Stocks: Bullish with move above 75% and bearish with move below 25%
S&P 500 High-Low Percent: Bullish with move above +10% and bearish with move below -10%
I will update the breadth model using StockCharts indicators, but note that I will be taking signals from the Norgate/Amibroker Breadth model from here on out. Nevertheless, the StockCharts model flipped bearish as the S&P 400 %Above 200-day EMA (!GT200MID) plunged below 40%. The S&P 600 %Above 200-day EMA (!GT200SML) never triggered bullish and S&P 500 %Above 200-day EMA (!GT200SPX) fell to 41%. These kinds of whipsaws happen when so many stocks are close to their 200-day SMAs.
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