Despite everyone’s growing concerns with… well… you name it – the economy, the president, the missiles popping off in Pyongyang – U.S. stocks are having a pretty good year.
Not as good as foreign stocks, as I explained two weeks ago. But still, the S&P 500 is up 9% year-to-date.
That’s roughly the long-term average for annual returns.
So, really, what’s there to worry about?
Stock prices always have the “last word,” in debates over valuation, risk, and the like. And since stock prices are indeed moving higher, it seems like, for now at least, all the worry has been for naught.
Although, fully outside the typical fodder of the news cycle, there is one development I’m watching closely, since it has the potential to either be an early warning signal… or, counterintuitively, a “buy” signal.
Let me explain…
I’m watching what we analysts call “market breadth.”
You see, the S&P 500 is an index of stocks. Its value is calculated based on the closing prices of each of the 500 stocks included in it.
Most people simply glance at the value of the S&P 500 index… and judge it based on whether it’s moving higher or lower.
But market breadth goes one layer deeper, aiming to determine what percentage of the individual stockswithin the index are trading in a bullish or bearish manner.
As I explained to my Cycle 9 Alert subscribers yesterday, the percentage of S&P 500 stocks that are trading above their 200-day moving average has been slipping lower in recent months.
