Significant Technical Damage Across Major Market Indices

This week’s brutal sell-off has resulted in large declines in many stocks. Looking at broad market statistics, the percentage of stocks which have fallen below key moving averages has exceeded previous corrections since the March 2009 lows. Here are some charts which show how broad the decline has been.

Percentage of Stocks above their 50 Day Moving Average

SPX Just 15% of stocks in the S&P500 are above their 50 Day Moving Average.

NDX The situation is even worse in the tech heavy Nasdaq 100 where just 12% of stocks are above the their 50 Day MA.

NYA The situation is better in the broader NYSE Composite. This index has many non-equity securities so the higher number is not a surprise.

Nasdaq The broader Nasdaq at 18% is slightly better than the Nasdaq100 but not by much.

OEX The S&P 100 is the worse of all, with just 10% of stocks above the 50 Day SMA.

The Ultra Large Caps did not offer any solace.

Percentage of Stocks above their 150 Day Moving Average

SPX The percentage of S&P 500 stocks above their 150 Day SMA fell below 60% for the first time since last April.

NDX 50% of all stocks in the Nasdaq100 are below their 150 Day SMA. This a level not seen since last March.

NYA The broader NYSE index has 52% of all securities trading above their 150 Day SMA.

Nasdaq The broader Nasdaq has less than 50% of all securities above their 150 Day SMA.

This number was even lower during the correction earlier this year.

OEX The S&P 100 has 54% of all securities trading above their 150 SMA.

Percentage of Stocks above their 200 Day Moving Average

SPX One third of all stocks in the S&P500 have broken through their 200 Day SMA.

NDX In the tech heavy Nasdaq 100 the number has fell by 26 to 64 this week.

NYA In the broader NYSE, 38% of listed securities have broken their 200 Day SMA

Nasdaq In the broader Nasdaq, barely 50% of all securities are above their 200 Day SMA

OEX The ultra large caps in the S&P 100 are doing the best with 65% of the stocks still above

their 200 Day SMA.

Failure to Hold 200 Day SMA
Though many stocks fall below their 50 Day SMA during corrections, it takes a significant change in sentiment for them to lose their 200 Day SMA.

Part of the damage is undoubtedly due to the big plunge on Thursday. It has shaken the confidence of market players and resulted in a reduction in risk exposure across the board.

Though the Main Stream Media have been hyping up the fat-finger hypothesis, that crash was primarily due to a withdrawal of bids as the selling intensified on Thursday.

A market which did not have too many shorts lacked the natural buyers to provide liquidity.

High Frequency players also withdrew from the market as it become clear that the market structure was breaking down.

Given the big run we have had since the March lows, the uncertainty in Europe and the potential for higher taxes going forward, the urge to take profits is likely to overwhelm the urge to speculate on further gains. The individual investors that were sitting on the fence, are unlikely to jump into the market after the 1000 point plunge, which has vindicated their fears about the market.

It is likely that all rallies will be seen as opportunity to lock in gains.

Apart from the market statistics I will also be tracking the flow of funds data over the next few weeks.

During the early part of this year, the inflow of funds to US Equity markets finally picked up. The troubles in Europe has also resulted

in reallocation of assets into US equities.

The Big Plunge is likely to alter this behavior as investor confidence in the moorings of the US equity markets has been significantly shaken.

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  • winter

    nice summary; bearish bias, but possible. also possible that investor sentiment will turn to buy the dip for those who didn't manage to get long in the meteoric climb to 1220. i expect a major ST rally with german elections today, the tories coming in to london tomorrow and coordinated central bank efforts to back stop everything. i hope against hope that the rally fails and we go down to a 950-1050 range for a couple of years, get our books clean and start a clean bull run like the 60s or 80s. we shall see. lots of dip buyers still abound. my aunt met with an MS wealth management guy a couple of weeks ago and he urged her to get into equities LT. I urged her not to, and hope she listened.

  • winter

    nice summary; bearish bias, but possible. also possible that investor sentiment will turn to buy the dip for those who didn't manage to get long in the meteoric climb to 1220. i expect a major ST rally with german elections today, the tories coming in to london tomorrow and coordinated central bank efforts to back stop everything. i hope against hope that the rally fails and we go down to a 950-1050 range for a couple of years, get our books clean and start a clean bull run like the 60s or 80s. we shall see. lots of dip buyers still abound. my aunt met with an MS wealth management guy a couple of weeks ago and he urged her to get into equities LT. I urged her not to, and hope she listened.