| NEW YORK
NEW YORK May 12 As the strongest earnings
season since 2011 draws to a close, and with the S&P 500
and Nasdaq Composite hovering near record highs, the
biggest concern for some market analysts is, well, the lack of
The largest daily move on the S&P 500 in almost three weeks
was only 0.4 percent. The small daily moves are partly the
reason for a more than 20-year closing low hit this week on the
CBOE Volatility index, a measure of investor anxiety.
"Most of what you’ll find that is outright negative will
have to do with sentiment," said Marc Pado, president at
DowBull.com in San Francisco.
"People worried about the market on a technical basis are
worried because there is too much complacency or optimism, but
not on an indication that there is some kind of top."
The S&P 500 posted record closing highs twice this week, but
both were lower than the intraday high set March 1, just below
2,401. The intraday record high set Tuesday, near 2,404, doesn't
signal a breakout from the resistance level set some 11 weeks
Precisely because of the sideways move, momentum has not
mirrored what was seen in early March. The 14-day momentum
measure of the S&P peaked this year on March 1. On Friday it
closed at its weakest level in nearly three weeks.
"The bigger risk now (to the stock market) would be
overbought conditions, even more overseas than in the U.S.,"
said Katie Stockton, chief technical strategist at BTIG in New
"If momentum doesn’t stay strong enough, which I think it
will, that would be a risk to the market. It’s a matter of
momentum remaining strong enough."
The Nasdaq Composite, which closed Friday almost 4 percent
above its March 1 close and set intraday and closing records
this week, is showing a particularly damning pattern in terms of
The 50-day average of advancing names on Nasdaq peaked this
year in mid-January and is in a clear trend lower. It hit its
lowest level this year on May 5, and the spread with the 50-day
average of decliners has been in and out of negative territory
since early March.
Waning breadth suggests the market advances on less than
solid ground as fewer and fewer stocks participate to the
On the S&P 500 the 50-day advancers average is at its lowest
level since the Nov. 8 U.S. presidential election. However, with
the index trading basically sideways since the March record, the
signal can be misleading.
"In every one of the (previous) legs higher we saw internal
breadth indicators confirming the new high. We haven’t seen that
over the last week but the high was marginal only," said Paul
Hickey, co-founder of research firm Bespoke Investment Group in
Harrison, New York, who remains with a positive view of the
"We see this as the continuation of a consolidation period
the markets have been in since March 1."
The case is even darker for the 30-component Dow
industrials, where the 50-day average of advancers is also near
the lowest level since November. Apple Inc alone is
responsible for 25 percent of the Dow's year-to-date advance,
even if the index is not market-cap weighted.
There's more bad news for Dow followers. The Dow Transport
Average, which peaked with the industrials on March 1, is
more than 6 percent below its high, while the industrials are
just 1 percent below their record.
A record on the industrials without the confirmation of the
transports would be another bad omen for stocks. Timing can be
blunt, but there was divergence present between these two
averages at major tops in 2000, 2007 and 2015.
(Reporting by Rodrigo Campos and Terence Gabriel; Editing by