Market Breadth: Analyzing The Change In Trend/Regime

Research Notes For 19 to 24 May > https://www.unum.capital/post/r1924may

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Let's analyze the market breadth data over the last three weeks.

In summary, the market breadth readings moved from a state leaning towards potential near-term selling opportunities at the end of 02 May, to a more neutral stance with some individual near-term buying opportunities emerging by 09 May, and then towards a slightly weaker overall picture by 16 May without a strong indication of a broad near-term buying opportunity.

End of Day: Friday 02 May 2025

The readings for this period show a notable presence in the higher momentum categories. There are 9 constituents in 'Overbought' and 23 in 'High Bullish Momentum / Approaching Overbought'. This suggests a significant portion of the JSE Mid & Large Caps were experiencing strong upward momentum. The 'Strong' category also had a substantial count of 14. The 'Neutral' category held 16 constituents, while 'Weak' had 11. There were no constituents in the 'High Bearish Momentum / Approaching Oversold' or 'Oversold' categories. Overall, this distribution leans towards potentially stretched conditions, hinting at a possible near-term selling opportunity for some constituents.

End of Day: Friday 09 May 2025

Moving to the readings from the following week, we observe a shift. The 'Overbought' category decreased significantly to 1, and 'High Bullish Momentum / Approaching Overbought' also saw a decrease to 6. The 'Strong' category became the most populated with 45 constituents, indicating a broader base of positive momentum, albeit less extreme than the previous week. The 'Neutral' category remained significant at 39. The 'Weak' category increased to 8, and we see the emergence of constituents in the lower momentum categories, with 1 in 'High Bearish Momentum / Approaching Oversold' and 1 in 'Oversold'. This distribution suggests a cooling of the previously strong upward momentum, with a larger number of constituents in neutral territory. The appearance of oversold readings for a few constituents might suggest near-term buying opportunities for those specific stocks.

End of Day: Friday 16 May 2025

The most recent readings show further changes. The 'Overbought' category increased slightly to 3, while 'High Bullish Momentum / Approaching Overbought' decreased to 13. The 'Strong' category decreased to 37, and the 'Neutral' category saw a slight decrease to 33. The 'Weak' category increased to 16, and we still see no constituents in 'High Bearish Momentum / Approaching Oversold', but there are no constituents in 'Oversold' either. This distribution indicates a further moderation from the high bullish momentum observed at the beginning of the period, with a larger number of constituents now in the 'Weak' category compared to the previous week. The absence of a significant number of readings closer to oversold does not strongly suggest a broad near-term buying opportunity at this point.

Lester Davids

Senior Investment Analyst: Unum Capital