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Trends & Analysis
News

Tesla shares spike despite earnings miss

News

Gold loses some shine after hitting record highs

News

Avoid the tech wreck with PayPal?

News

Week Ahead Preview: 22nd of April

News

P&G shares rise despite Q3 sales miss

News

Gold continues to shine amid geopolitical worries

Asset Watch

Does the S&P 500 have a breadth problem?

 

Thursday, June 8, 2023

While AI enthusiasm has uplifted the S&P 500, a small number of stocks have driven the bulk of the gains. And as the have-nots await their time to shine, it’s been a while since many U.S. companies have prospered.
While the U.S. equity benchmark marches toward its August 2022 high, the percentage of S&P 500 stocks trading above their 50-day moving averages pales in comparison. For example, when the S&P 500 hit its summertime peak, more than 90% of the index’s constituents traded above their 50-day MAs. In contrast, the figure is closer to 50% now. As a result, it’s been a relatively narrow rally, with many companies failing to participate.

If the laggards play catch-up in the weeks ahead, it could provide fuel for further S&P 500 upside. In March 2023, the index rallied by nearly 100 points, while the percentage of stocks above their 50-day MAs remained stuck near 18%. The figure soon increased to 60%, which helped keep the index uplifted. So, we could witness a similar event this time around.

The only caveat is S&P 500 seasonality turns bearish in mid-June, and the index often breaks below its May low, which is south of 4,100. Therefore, unless breadth picks up over the next several days, it could be correction time.

Should we expect the laggards to become leaders, or is the AI-driven rally as good as it gets?


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