Breadth: Interpretation of Market Conditions

Research Notes For 09 to 13 June > https://www.unum.capital/post/r0913june

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The total number of constituents has increased from 103 to 105 over the week.

Comparing the readings from 30 May to 06 June, several shifts in market conditions are observable:

• Overbought: The number of constituents in the 'Overbought' category has decreased slightly from 11 to 7. This suggests a minor reduction in extreme bullish sentiment.

• High Bullish Momentum / Approaching Overbought: This category has seen a decrease from 14 to 12 constituents, indicating a slight cooling in strong bullish momentum.

• Strong: The 'Strong' category has increased from 33 to 35, suggesting a modest strengthening of positive trends within the market.

• Neutral: The most significant shift is seen in the 'Neutral' category, which has increased from 37 to 40 constituents. This indicates a growing number of stocks without a clear short-term trend.

• Weak: The 'Weak' category has increased from 7 to 11, pointing to a rise in stocks exhibiting weaker price action.

• High Bearish Momentum / Approaching Oversold: This category has decreased from 1 to 0, indicating a complete absence of constituents approaching oversold conditions with strong bearish momentum.

• Oversold: Remains at 0 for both periods.

Summary of Market Conditions:

Overall, the market breadth readings from 30 May to 06 June suggest a subtle shift away from the stronger bullish and overbought conditions, with a notable increase in constituents exhibiting 'Neutral' and 'Weak' short-term trends. There is a reduction in both 'Overbought' and 'High Bullish Momentum' readings, while 'Strong' and 'Neutral' categories have expanded. The absence of 'High Bearish Momentum / Approaching Oversold' and 'Oversold' readings in both periods indicates that the market is not currently presenting broad near-term opportunities driven by oversold conditions. Conversely, with fewer constituents in the 'Overbought' and 'High Bullish Momentum' categories, there might be fewer immediate widespread selling opportunities compared to the previous week, as a greater majority of constituents are not closer to overbought readings. The shift towards 'Neutral' and 'Weak' suggests a market that is consolidating or losing some of its previous upward impetus, but is not yet displaying widespread bearishness that would suggest near-term opportunities from oversold conditions.

Lester Davids

Senior Investment Analyst: Unum Capital