Saturday, November 14, 2009

S&P 500 Equal Weight Index

the lagging of the SPXEW:SPX ratio tells us that even as the broad market hits or tests (depending on which index you prefer) new highs, fewer stocks are participating in the party. this is normally a prerequisite for any substantial bear reaction.

as an additional small bit of evidence that the market has tired, I notice that the number of S&P stocks below the 50 day moving average is, well, below the 50 day moving average. I haven't back-tested this farther back than this year, but I doubt this is a very healthy situation.

additionally we are seeing larger blue-chippy issues that have lagged the market all year getting bid up indiscriminately all of a sudden. (MCD and ABT come to mind.) stuff like that is making me suspicious.

that said, I do think US large caps (and the larger, the better) offer the least amount of downside over the tradeable future. US small caps are already lagging significantly, and the S&P World ex-US index is lower relative to the S&P 500 than it was a couple months ago.