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All Major Indices Retraced Over The Past Week

ByIgor Rakhmanov
Published 08/28/2012, 05:00 AM
Updated 07/09/2023, 06:31 AM

Over the week all major indices retraced a bit from -0.08% (NASDAQ 100) to -0.88% (Dow Jones Industrial Average). Although this retracement is insignificant and lies within the 1 ATR (14) limits and can be easily counted as noise, it's always interesting to look beneath the surface to see if there are some troubling signs on the horizon.

As you already know I like to use for this purpose the Sector Breadth Model (SBM) which I look at as a confirmation/non-confirmation indicator of the market moves. So, let's look what changes in the sector breadth were registered by the SBM over the last week.
BPTRAN CHART
Despite the little retracement in the indices the SBM shows internal strength in 4 market sectors. The BPIs of the Discretionary, Industrials and Staples sectors added 2% each. The BPI of the Materials sector continues its run from the previous week adding another 4% mostly because of strength of the stocks in the Gold Mining Industry.

Taking into account the improving internals in the leading sectors (Discretionary, Industrials) I think that the current retracement is only a temporary stop on the way to higher prices. At least I have to see a decline in indices accompanied by deterioration in the sector breadth to change my bullish opinion, and I don't see it yet.

For comparative purposes I placed on the chart in the purple boxes the March readings of the sectors BPIs, the time when all major indices made new highs. It's not guaranteed that we'll see the same readings during the ongoing rally, but it shows that there is still a lot of room for keeping this rally intact and this should be taken into consideration.

Disclaimer: I express only my personal opinion on the market and do not provide any trading or financial advice (see Disclaimer on my site).

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