Markets Operating at a Dangerously Low Scale |

Markets Operating at a Dangerously Low Scale |

  • The percentage of S&P 500 stocks trading above their 200-day moving average hit a low of 36%
  • The benchmark stock index has been below its 200-day moving average for five months now, its longest streak since 2009
  • Only 28% of NASDAQ Composite stocks are above their 200-EMA

Market breadth refers to the number of stocks that participate in a given move in an index or exchange. It can be interpreted on the basis of two hypotheses:

1. The number of stocks going up versus the number of stocks going down in an index.

  • Positive Market Range: The number of rising stocks is greater than the number of falling stocks. For example: if an index has 60 stocks if 40 is up and 20 is down.
  • Negative market breadth: the number of stocks going down is more than the number of stocks going up.
  • Neutral Market Breadth: If the ratio of rising and falling stocks is not substantially different. For example, an index has 100 stocks, 52 are up and 48 are down.

2. The percentage of stocks in an index trading above their moving averages.

  • The lower the percentage of stocks above the 200-day moving average, the weaker the index.

This is what is happening now. The percentage of stocks above the 200-day moving average fell to 36%, stocks fell to 28%, and stocks fell to 29% (in August the percentage was 86%).

Additionally, the S&P 500 has been below its 200-day moving average for five consecutive months, the longest streak since May 2009.


Tech stocks have been particularly hard hit in recent weeks, with the NASDAQ Composite losing almost -10% since mid-August.

NASDAQ Daily Chart

In addition, US equity funds saw large outflows in the week leading up to September 7. Investors withdrew $14.83 billion, the largest weekly volume since June 15.

On the positive side, US fixed income funds saw inflows of $1.51 billion after two consecutive weeks of redemptions.

Investor Sentiment (AAII)

Bullish sentiment (expectations that stocks will rise over the next six months) fell 3.8 percentage points to 18.1% and remained below its historical average of 38%.

Bearish sentiment (expectations that stocks will fall over the next six months) rose 2.9 percentage points to 53.3% and remained above its historical average of 30.5%.

AAII Market Sentiment

The ranking of the global stock market so far in 2022 looks like this:

  • Brazilian: +9%
  • British: -0.45%
  • Japanese: -2%
  • Spanish: -7.81%
  • : -11.52%
  • French: -13.15%
  • S&P 500: -14.66%
  • : -16.95%
  • Chinese: -17.14
  • German: -17.61%
  • Italian: -19.21%
  • NASDAQ: -22.58%

GBP between a rock and a hard place

The continues to depreciate against the and has already fallen to a level not seen in 37 years.

The has now raised rates six times in a row and is expected to deliver another 50-75 basis point hike on Thursday, September 22. Before that, Wednesday the 14th, we’ll have the 8am data (in August it was 10.1%, the highest in 40 years).

The chart below shows that the currency is trading just around a major resistance in the 1.1452 area, which acted very well the last time it was hit, preventing further declines and leading to a good bounce. For the time being, it has returned on September 5 and is bouncing upwards.

GBP/USD weekly chart

Collapse of the negative interest rate policy

A few years ago, several central banks embarked on an “experiment” of implementing a negative monetary policy. Specifically, these were the central banks of Denmark, Japan, Switzerland, Sweden and the European Central Bank.

However, only two maintain such a policy today: Japan and Switzerland. And while Japan remains reluctant to change its strategy, Switzerland is considering it, to which we will have an answer in its Central Bank’s bulletin on September 22.

Denmark was the last country to emerge from this spiral a few days ago, raising its interest rates from -0.1% to 0.65%. In this way, they close a phase started ten years ago with the intention that investors do not buy massively.

Disclosure: The author does not currently hold any of the titles mentioned in this article.

#Markets #Operating #Dangerously #Scale

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