In spite of the market making new, all-time highs this week, participation continued to deteriorate. Our focus is usually on the S&P 500 Large-Cap Index, so we’ll begin with that, but mid- and small-cap stocks are really looking bad as well. The Silver Cross Index for the S&P 500 has dropped to 60%, meaning that 60% of SPX stocks have the 20EMA above the 50EMA. Obviously, the largest component stocks are holding the index aloft. This is entirely possible because there are some giant stocks in the index; however, 60% is really starting to push the envelope. To make matters worse, only 50% of SPX stocks are above their 50EMA, meaning that there is the potential for an additional 10% of stocks to lose their Silver Cross status, which would leave only 50% of stocks supporting the index.
