We like to monitor broad market participation, asking how many stocks are actually taking part in a market advance. A good way to do this is to track the percentage of S&P 500 stocks that are above their 20EMA (short-term), 50EMA (medium-term), and 200EMA (long-term). On the chart below we can see that in October the market began losing participation in the short term, as the percent above 20EMA began trending downward, while the market made progressively higher tops. Currently, with the market near all-time highs, only 61 percent of stocks are above their 20EMA. That’s quite a negative divergence.
