S&P 500: The Anatomy Of A Retest Of The Low by Eric Bush, CFA, Gavekal Capital Blog
The S&P 500 is now only about 1% off its 8/25 low. Have the market internals deteriorated as much as the headline price index has? Lets take a quick tour through our chart library to find out.
On 8/25, 17% of US stocks were trading below its 200-day moving average. As of yesterday, this series has dropped back to 19% after increasing to 33% on 9/17. Unfortunately, we haven’t seen a trend shift in momentum yet. Through yesterday, 33% of US stocks had its 50-day moving average trading above its 200-day moving average. On 8/25, 51% of stocks had its 50-day moving average trading above its 200-day moving average
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Large declines in stocks are ticking up again but still below the 8/25 level. The number of stocks with a one-day 5% decline was 83 yesterday. On 8/25, there were 150 US stocks that declined by at least 5%. It’s hard to imagine that we went through a period in 2008 where we regularly were seeing 200-500 US stocks decline by 5% in a day.
The median stock performance over the past year is unchanged. Over the past 200-day, the median stock performance YTD is -8%. This is the same level as it was on 8/25 and is the worst YTD performance since 2009.
83% of US stocks are at least in a correction over the past 200 days. On 8/25, this spiked to 90%. The number of US stocks in a bear market has increased. 48% of US stocks are now in a bear market over the past 200 days compared to 43% on 8/25. While this has been painful for investors, far fewer stocks are in bear market today than were in a bear market in 2011 and 2008.
Finally, in a positive sign the number of stocks making new 200-day lows remains below the 8/25 high. On 8/25, 39% of US stocks were making new 200-day lows while “only” 31% made new 200-day lows yesterday. This will be an important internal indicator to keep an eye on as new highs in 200-day lows tend to mark the emotional peak in a market downturn. For example, on 8/8/2011 54% of US stocks made 200-day lows. The ultimate price bottom was on 10/3/2011 when 44% of US stocks made new 200-day lows. In 2008, an unbelievable 80% of US stocks made a new 200-day low on 10/9/2008. The eventual price bottom wasn’t until 3/9/2009 when only 35% of stocks made a new 200-day low.
All in all, the market internals haven’t been quite as bad as the recent price action. Negative momentum hasn’t accelerated, the number of large declines are fewer than they were on 8/25 and most encouragingly, the percentage of stocks making new 200-day lows are less than they were about a month ago. On the flip side, the most concerning internal data is the fact that more stocks are in a bear market today than they were on the 8/25 low. It’s too early to tell if we have seen the ultimate price low for this correction but we believe that tracking new 200-day lows should be a helpful sign post for investors.