Hey, Ross here:
The S&P 500 closed at another record high yesterday.
And yet, as today’s chart shows, market breadth has been pretty lackluster.
Chart of the Day
Over 50% of stocks are trading below their 50-day moving averages.
When we look at the 20-day moving average, we find over 55% of stocks trading below it.
Market breadth is unimpressive – yet the S&P 500 just keeps hitting record highs.
This divergence should make us cautious. Again, expect a short-term pullback in the broader market.
But there’s also a positive side to divergences – which I explain in the Insight of the Day.
Insight of the Day
Because market leaders move ahead of the broader market, they create positive divergences that can be taken advantage of.
To know where the market is going, look to the market leaders.
Yes, the broader market looks like it’s about to enter a healthy yet necessary pullback/consolidation.
But many market leaders are already reaching the end of that stage – and could be about to break out strongly.
This is a form of positive divergence – and it allows you to target big profits even when the market is about to run into a wall.
As for how to spot these fast-moving market leaders?
Editor, Stock Surge Daily