Mid-week market update: The stock market’s weakness last Friday moved the Zweig Breadth Thrust Indicator back to oversold and reset the count for a ZBT buy signal. Monday’s strong recovery was day 1, and we’ve seen three consecutive days of strong breadth. Have the market gods decided to give me a ZBT buy signal as a retirement present?
Let’s wait and see.
Constructive Breadth
I am certainly seeing constructive signs of recovery. An analysis of the major market averages shows that smaller stocks, which dominate breadth indicators, as the leadership. The equal-weighted S&P 500 and the Russell 2000 have rallied above their falling trend lines. On the other hand, the NASDAQ 100 has not and it’s dragging down the S&P 500.
One surprising aspect of the rebound is the strength of the cyclical leadership. Cycical industry relative performance are all in various stages of relative rebounds. The market is in effect looking through the valley of any potential slowdown from the war.
Both equity and credit market risk appetite indicators are also turning up and exhibiting psotive divergences, which is another bullish sign.
By pointing out all of these signs of improvement, I expect that I am jinxing the prospect of a ZBT buy signal. Undoubtedly much will depend on the progress of the war and negotiations.
I am hopeful, but one tweet can instantly change the tone of the market.