Last week, the bears demonstrated that they are still active, with one-month lows for the S&P 500, 400, and 600 started to expand.
Here’s the chart:
Let's break down what the chart shows:
The blue line in the top panel is the S&P 500 index price.
The black line in the second panelshows the percentage of S&P 500 stocks making one-month lows.
The red line in the third panelshows the percentage of S&P 400 stocks making one-month lows.
The gray line in the bottom panelshows the percentage of S&P 600 stocks making one-month lows.
The Takeaway: On Friday, all major indices fell by over 1.5%. This was a show of force from the bears. With this widespread weakness, we observed one-month new lows rising across all market capitalizations.
While the overall evidence still suggests a bullish trend, Friday marked a possible turning point for the bears as nearly one-fifth of the S&P 500 stocks reached one-month new lows, and more significant weakness was observed in small- and mid-cap stocks, with nearly one-third of them hitting one-month new lows.
Although the recent increase in one-month new lows does not raise any major concerns at this moment, I will be monitoring the bears this week. I want to see if they can sustain this momentum and continue pushing new lows into longer timeframes.
On average, each year tends to have 3 to 4 pullbacks of 5% or more. Would you be surprised to see a pullback here?
Grant Hawkridge | Chief Aussie Operator, All Star Charts
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