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Low Participation

Jason Goepfert
2021-06-25

The other day, we saw that the percentage of S&P 500 members above their 50-day moving averages had plunged, even while the majority were still above their 200-day averages. That has tended to be a good sign.

The problem is what's happened in recent sessions. Despite a push to new highs in the S&P, the percentage of its members above their averages has barely budged. In terms of divergences, this one is gonzo.

Going back to the mid-1920's, there have only been a handful of dates with breaks like this.

The risk/reward table shows just how skewed most of the returns were following these signals. Over the next 3 months, it's hard to find a date with more reward than risk.

Several more days (or weeks) with this kind of behavior should trigger all kinds of risk warnings, the types of things we've been watching for ever since speculation reached its heights in February.

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