Don't Chase It

Igor Manukhov - Dec 21, 2023

The market breadth suggests that we are due for a pause. Have patience, but be ready to deploy funds.

The market continues to push ahead in December, finally breaking through the 4600 critical level. It does appear that it got ahead of itself for the time being. Last week I pointed out that momentum has been slowing down despite a ferocious price advance. This week I would like to show you what is happening with the market breadth (market participation, or in plain English, how many stocks are rising with the market).

In this uptrend, the market is trading above it's 150 day moving average (black line is above the purple line on the top panel). The orange line below shows how many stocks out of the S&P500 are trading above their respective 150 day moving average. This indicator fluctuates between 0% to 100%. In a bull market, you want to see many stocks pushing the overall market higher, however, at some points things get too overheated. I tend to get more cautions as this indicator crosses a 70% reading. Notice how the market tends to stall and sometimes peak around the time when the orange line is at or above 70% mark (I highlighted those instances with blue circles). As I mentioned before, I do believe that we are in the early stages of this most recent cyclical bull market, however I would be cautious at this time. That being said, I would recommend putting funds to work when the markets cools off a bit.

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Don't Chase It

Igor Manukhov - Dec 21, 2023

The market breadth suggests that we are due for a pause. Have patience, but be ready to deploy funds.

Igor Manukhov

Peter Kuntyj

Yelena Manukhova

Brittany Stone

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