Participation is Waning

Igor Manukhov - Apr 14, 2023

While the market is trying to set in a new uptrend, the participation of stocks in this rally is waning. I would not rule out a pause or a slight pullback in the near term.

Market participants seem excited again. The market price is challenging the February high. One area that does bother me a bit is the lower participation in this rally. In plain English, fewer stocks are pushing market higher. The upper panel of this chart shows the price of the US market (S&P500). Trading above its 150 day moving average (purple line). The green line below shows how many stocks are trading above their respective 150 day moving average within the S&P500 (green line, expressed in percentage from 0% to 100%).

Ideally, I would like to see broadening stock participation in a rally, but notice that while the market is surpassing the previous peak of Feb, it is doing so with the help of fewer stocks than before (blue lines on both charts).This is a check engine light moment for me. I would not be aggressively buying stocks right now. Notice how the previous times this setup occurred (marked with red lines) stocks went down.

I do not expect a drop like last year or like the one we had back in 2020, but I would not be aggressive at this time.

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Participation is Waning

Igor Manukhov - Apr 14, 2023

While the market is trying to set in a new uptrend, the participation of stocks in this rally is waning. I would not rule out a pause or a slight pullback in the near term.

Igor Manukhov

Peter Kuntyj

Yelena Manukhova

Brittany Stone

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