{"id":58336,"date":"2021-12-10T17:44:26","date_gmt":"2021-12-11T01:44:26","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=58336"},"modified":"2021-12-10T22:02:07","modified_gmt":"2021-12-11T06:02:07","slug":"oversold-bounce-carved-out-new-divergence-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2021\/12\/10\/oversold-bounce-carved-out-new-divergence-the-market-breadth\/","title":{"rendered":"Oversold Bounce Carved Out A New Divergence – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

The stock market’s dip into oversold territory<\/a> lasted the typical one day. The immediate wake was ugly<\/a>. The follow-through revealed a new divergence. The resulting oversold bounce carved out the S&P 500 for special status as the winner of the divergence. The index hit an all-time high while the majority of the stock market churned its way into the close of the week. The stalled indicators of market breadth presented a stark contrast to the continued momentum of the S&P 500.<\/p>\n\n\n\n

The Stock Market Indices<\/strong><\/h2>\n\n\n\n

The S&P 500 (SPY) gained 4 out of 5 days in the week. The push from oversold trading conditions<\/a> was just enough to earn the index an all-time high. Despite the fears at the time, the S&P 500 held support at its 50-day moving average (DMA) (the red line below) like all but one other visit to this support line during the pandemic. This predictable pattern<\/a> continues to astound me. The S&P 500 is now poised for a run to 4760 and higher to close out the year.<\/p>\n\n\n\n

\"The<\/a>
The S&P 500<\/a> (SPY) sprinted into the close for a 1.0% gain and an all-time high. <\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) sprinted higher with the S&P 500 on Tuesday. However, the tech-laden index essentially stalled out from there. The NASDAQ is burdened with the expensive growth stocks that are falling out of favor again. Inflation fears and the overdue response from the Fed are dampening enthusiasm for paying any price for growth and reducing the tolerance for unprofitable companies. Still, the NASDAQ is close to “escape velocity” from the oversold trading period. The index just needs a second higher close above its 20DMA (the dotted line).<\/p>\n\n\n\n

\"The<\/a>
The oversold bounce quickly stalled for the <\/b>NASDAQ<\/a> (COMPQX)<\/b>. The index churned the last three days of the week with a pivot around the 20DMA.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF<\/a> (IWM) looks ready to get boring within its trading range. The 200DMA (the blue line below) acted as effective resistance capping the bounce from oversold conditions. I learned a lot of lessons trying to chase IWM around this year. I will stick to buying this index of small cap stocks near the bottom of the trading range until the price action changes significantly.<\/p>\n\n\n\n

\"\"\/<\/a>
The iShares Russell 2000 ETF<\/a> (IWM) is firmly back in its comfort zone churning away in an ever extending trading range. The 200DMA acted as resistance for the week.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

Financials bounced with the rest of the market but stalled out quickly like the NASDAQ. The SPDR Select Sector Fund (XLF) shied away from 50DMA resistance. Perhaps XLF is anxiously awaiting the results of the coming meeting of the Federal Reserve.<\/p>\n\n\n\n

\"\"\/<\/a>
The SPDR Select Sector Fund<\/a> (XLF) churned just under its 50DMA resistance. Financials are in a pre-Fed holding pattern.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n