Above The 40 – A Deepening Bearish Divergence For The S&P 500 Tarnishes Apple’s Moment

(“Above the 40” uses the percentage of stocks trading above their respective 40-day moving averages [DMAs] to assess the technical health of the stock market and to identify extremes in market sentiment that are likely to reverse. Abbreviated as AT40, Above the 40 is an alternative label for “T2108” which was created by Worden. Learn more about T2108 on my T2108 Resource Page. AT200, or T2107, measures the percentage of stocks trading above their respective 200DMAs.)

AT40 (T2108) Status: 52.3%
AT200 (T2107) Status: 65.6%
VIX Status: 11.8
Short-term Trading Call: neutral

Commentary
The S&P 500 (SPY) can thank its ability to stay out of negative territory to earnings from Apple (AAPL).

Apple gapped up to a 6.1% post-earnings gain and a new 18-month high.

This impressive 6.1% gain was just enough to help squeeze the S&P 500 into a close flat with the previous day’s close. The flat close also means the index still sits right on my line in the sand between a bearish (below) and a neutral (above) trading call.

The S&P 500 finished flat on the day after briefly challenging last week’s bearish abandoned baby top pattern.

We know that AAPL was the main savior of the S&P 500 because AT40, the percentage of stocks trading above their respective 40DMAs, tumbled significantly on the day. AT40 hit a new 2 1/2 month low and looks ready to reverse all of its post-election gain. For the past 3 days, AT40 has returned to a downtrend that refreshed the warning sign of a bearish divergence with the S&P 500. The S&P 500 sits comfortably within the confines of its earlier trading range while stocks in general are slowly but surely declining (dropping below their 40DMAs).

AT40 (T2108) closed at a 2 1/2 month low as a bearish divergence with the S&P 500 picks up steam again.

The month of February started with another pronouncement on monetary policy from the U.S. Federal Reserve. The statement contained nothing new, and it looked like a copy and paste from so many similar past statements. No surprise then that the net market reaction was very muted. The market next looks forward to the U.S. employment report on Friday.