- The S&P 500 has held above its 50-day moving average since May, marking the longest streak since 2011. However, roughly half its components are above their respective 50-DMAs.
- The % above the 50-DMA started diverging in July, almost immediately after the S&P 500 emerged from its V-shaped recovery. As Aaron notes, a deeper washout may be necessary before internals improve again.
- Divergences can persist for a while before they matter, and Mega-Caps can mask broad weakness within the S&P 500. But, narrowing breadth isn't a characteristic of a healthy uptrend.
The Takeaway: While the S&P 500 has consistently made new highs since July, breadth has continued to deteriorate, and a deeper washout may be necessary before the divergence resets.
