Russell 3000: Strong Rebound +27% Following 'Washed-Out' Breadth Readings; Now, Bearish Divergence Provides Early Warning on Risk

Research Notes For 14 to 18 July > https://www.unum.capital/post/r1418july

Trade Local & Global Financial Markets with Unum Capital.

To get started, email tradingdesk@unum.co.za

Th Russell 3000 has rallied by 27% since we highlighted the 'washed-out' breadth readings.

Bearish divergence via % of shares above their 20-day & 50-day moving averages

---

Previous Post (Sunday, 06 April):

Russell 3000. These Chart Help Us Understand...

The Russell 3000 Index (three thousand) measures the performance of 3,000 stocks and includes all large-cap, mid-cap and small-cap US equities, along with some microcap stocks. The index is designed to represent approximately 98% of investable US equities by market capitalization. In this note we consider the index breadth readings i.e. the percentage of shares above the 200, 50, 20 and 5-day moving averages. This helps us understand the breadth of the sell-off and whether the current readings is comparable to that of or (near) previous bottoms.

• % of Shares Above The 200-day Moving Average = 15.57%

• % of Shares Above The 50-day Moving Average = 7.41%

• % of Shares Above The 20-day Moving Average = 5.37%

• % of Shares Above The 5-day Moving Average = 2.44%

The chart below highlights two items:(1) the Russell 3000 index (upper panel) and (2) the % of shares above their 200-day moving averages. Here, we also highlight the index lows over the past decade vs the low in the breadth (% vs 200-day). At current levels, the percentage of shares above their 200-day moving averages is 15.57% which is near the low. It's worth noting that in March 2020 the percentage of shares above their 200-day moving averages was just below 5% which indicates that breadth has the ability to further deteriorate from current levels.

Lester Davids

Analyst: Unum Capital