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Has The Stock Market Breadth Improved?


30 June 2021

This week has been particularly lackluster for the US and European stock markets. Traders do not seem to be finding their appetite for riskier assets and the main concern among them has been about rising inflation. Basically, what investors are doing is monitoring the economic numbers very closely and trying to guess the next move by the Federal Reserve about their monetary policy. It is highly likely that the Fed may be on the edge of thinking of beginning the discussion of pulling back some of their coronavirus related support. As for the markets, we continue to see low volume and subdued volatility and both of them are signs of a major brewing.

The Asian stock market traded mostly mixed on Thursday. The Nikkei index fell 0.54%. The Shanghai index increased by 0.13%, while the ASX index declined 0.28%. The HSI index also fell by 0.39%.

Dow Jones and S&P 500: Market Breadth

The Dow Jones’ market breadth seemed to be losing more momentum. 73% of the Dow Jones stocks traded above their 200-day moving average. The S&P 500 stock breadth also displayed less strength yesterday. 75% of the shares traded above their 200-day moving average.

The Dow Jones futures are trading flat today. In terms of economic data, investors will be looking at the upcoming Weekly Jobless Claims data more closely. The forecast is for 427K while the previous number was at 444K. In addition to this, we also have the US Prelim GDP q/q numbers and the forecast is for 6.5% while the previous reading was 6.4%.

The Dow Jones futures are trading lower for the third consecutive day. There hasn’t been much of price movement but the Dow Jones futures market have logged two consecutive days of losses yesterday. Having said that, the Dow Jones futures are still trading above the 50-day SMA on the daily time frame. Given the weakness in the price action, it is likely that we may see the Dow breaking below the 50-day SMA. If it does that, it will be the third time, the Dow will break below the 50-day SMA in less than a month which will mean more weakness ahead for the price action.

As for the RSI, we do not see any signs of strength as well as it is stuck near the 55 RSI level. For the past few days, the RSI has been moving sideways and only a reading of 30, something which is associated with oversold, or a reading of 70, which is associated with overbought, are likely to bring more action for the Dow.

The near term support is at 33,366, while the resistance is at 34982.

Stock Market Rally

The S&P 500 stock index closed higher yesterday; the index advanced by 0.03%. The tech sector led the index higher and 10 out of 11 sectors closed lower. The Dow index scored some modest gains yesterday; the Dow stocks moved the index higher by 0.03%. 12 shares advanced, while 18 shares closed lower. The NASDAQ composite, a tech-savvy index, also closed slightly higher yesterday. It advanced by 0.59%

S&P 500 Leaders and Laggards: Ford and Ball Corp

Ford stock contributed the biggest gain, soaring 8.5%. Ball Corp stock was the largest drag; it fell by 4.22%. The S&P 500 stock index is up 11% so far this year.

Nike provided the biggest help for the Dow Jones; it advanced by 1.91%, while Walgreens was the largest decliner, it fell by 4.023%.

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