— David Keller, CMT (@DKellerCMT) February 10, 2020
Today’s Chart of the Day was shared on Twitter by David Keller (@DKellerCMT). It’s a chart of the S&P 500 over the past five years. The two breadth indicators in the bottom pane show the percentage of stocks that are trading above their 200-day moving averages for both the NYSE Composite index (top) and the S&P 500 (bottom). The S&P 500 has rebounded to all-time highs after a minor pullback that began in late January. While all-time highs are not a bearish characteristic, David points out that several bearish divergences are forming that suggest that this rally could be running out of steam in the near term. The pink lines denote the breadth divergence he’s referring too. As you can see, the S&P 500 hit a new high, but fewer stocks within the index have recovered above their 200-day moving averages. Divergences like this can persist for a while without any implications; however, this is one bearish development that’s worth paying attention to in the days/weeks ahead.