In the past week, there have been a couple of days that showed unusual breadth readings wherein the S&P 500 generated a very small change on the day, but there was a large number of stocks on the NYSE that advanced. This means that issues other than the largest stocks are pushing the advance-decline line up. This can be a bearish signal as was the case near the end of 2014, prior to that the end of 2006, the spring of 2004.
The best way to monitor this development is to track the relative price behavior of the VLIS (equally-weighted) versus the OEX (heavily-weighted by large-cap stocks). This ratio has been rising since the February low. The drops in IBM, NFLX, GOOG, MSFT and AAPL are indicating a big-cap bear market. The overall bear market is not over. It is simply more developed in the small-cap stocks and just beginning in the big-cap shares. The latter stock group has more weight in the indices and is where weakness is likely to be concentrated.
This is an excerpt from the monthly Cycles Research Early Warning Service, a monthly e-mail report that analyzes the trends in the US stock market, the bond market, and the gold market. There are stock and ETF recommendations and high-probability S&P turning points.
Cycles Research Investments, LLC does not guarantee the accuracy and completeness of this report, nor is any liability assumed for any loss that may result from reliance by any person upon such information. The information and opinions contained herein are subject to change without notice and are for general information only. The data used for this report is from sources deemed to be reliable, but is not guaranteed for accuracy. Past performance is not a guide or guarantee of future performance. The information contained in this report may not be published, broadcast, re-written, or otherwise distributed without prior written consent.
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