Breadth Indicators Point to Further Rise in the Indices

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S&P 500, Euro Stoxx 50, UK FTSE 100 – Price outlook:

  • 94% of the members in the S&P 500 index is above its respective 10-DMAs.
  • 98% of the members in the Euro Stoxx 50 index is above its respective 10 DMAs.
  • 91% of the members in Great Britain FTSE 100 index is above its respective 10-DMAs.

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Improving market breadth points to further gains in the S&P 500, the UK FTSE 100, and the Euro Stoxx 50 index in the coming weeks, at least based on their historical performance.

As of Thursday, 94% of the members in the S&P 500 index were above their respective 10-day moving averages (DMA), just as the index appears to be setting the stage for a significant rebound. Data from 1996 onwards suggests that when 93%-94% of members were above their respective 10-DMAs, the index rose 71% of the time over the subsequent 30 days (the distribution plot on the right panel; note fifth. -monthly a gap is kept between two readings).

Distribution plot of S&P 500 index returns

image1.png

Data source: Bloomberg; Diagram Created by Manish Jaradi in Python

As of Thursday, 98% of the members in the Euro Stoxx 50 index were above their respective 10-day moving averages. Data from 2002 onwards suggests that when 97%-98% of the members were above their respective 10-DMAs, the index rose 61% of the time over the subsequent 30 days (the distribution plot on the right panel; note fifth. -monthly a gap is kept between two readings).

Distribution plot of Euro Stoxx 50 index returns

image2.png

Data source: Bloomberg; Diagram Created by Manish Jaradi in Python

By Thursday, 91% of the members in the UK FTSE 100 index were above their respective 10-day moving averages. Data from 2002 onwards suggests that when 91%-92% of members were above their respective 10-DMAs, the index rose 69% of the time over the subsequent 30 days (the distribution plot on the right panel; note fifth. -monthly a gap is kept between two readings).

Distribution plot of UK FTSE 100 index returns

image3.png

Data source: Bloomberg; Diagram Created by Manish Jaradi in Python

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— Written by Manish Jaradi, Strategist for DailyFX.com

— Contact and follow Jaradi on Twitter: @JaradiManish



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