Info!! Weakening Breadth Too Rise Volatility Inwards The Stock Market

Here are the reasons I am cautious most the stock marketplace at this juncture:

1)  We are seeing practiced buying action inward stocks, every bit gauged past times the NYSE TICK which has been making novel highs on a cumulative basis.  Among the large caps (top chart), that buying action is no longer able to laissez passer on us fresh cost highs.  (Credit for the operate past times iii charts to Index Indicators).  Note that breadth inward the large caps has continued to dwindle throughout 2015, with fewer 100-day novel highs vs. lows.

2)  We accept seen greater recent cost forcefulness with mid-caps (second nautical chart from top) as well as small-scale caps (second nautical chart from bottom), every bit we're hovering close cost highs.  Despite this, the breadth specific to mid-caps as well as small-caps has likewise been waning, with fewer shares making novel highs vs. lows inward Apr than March.

3)  If yous aspect at the cash VIX, it seems every bit though volatility remains crushed, every bit VIX is sub-15.  Actual volatility, however, every bit measured past times average truthful attain over a rolling 100-day period, has been higher during 2015 than during the vast bulk of the prior ii trading years.  Rising volatility inward stocks historically has been associated with weakening markets, non strengthening ones.  Indeed, volatility picked upwards at marketplace highs inward 2000 as well as 2007 good earlier the subsequent send markets.  While I don't aspect that sort of send marketplace action currently, whatever downside intermission from hither would probable run across greater volatility than recent corrections.

I likewise banking corporation annotation that the volatility of realized volatility (vol of vol) has been higher late than at whatever fourth dimension since 2013.  The recent rising inward realized volatility as well as vol of vol helps to explicate why short-term traders accept had difficulty trading U.S. of America stocks:  We've had movement, simply non trend.  It's been a choppy, volatile attain trade.  Buying forcefulness or selling weakness--trading with a fearfulness of missing out--has been a consistent means to lose money.  Viewed on a longer fourth dimension scale, however, this marketplace appears to hold out i of narrowing breadth--even with those smaller cap sectors that accept been strongest.  That keeps me cautious.

Further Reading:  Macro Themes Impacting Stocks
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