Weak Breadth and Mega-Cap Tech Declines Signal S&P 500 Index Rally Needs Repair

Micron Leads The Heat Map While Mega-Cap Tech Cools

So Micron’s up 4.96%, with the move being tied to the AI-memory trade staying hot, with analysts still flagging strong NAND and DRAM demand, tighter supply, and potential support from Samsung labour disruption risks. That’s right. Samsung workers are threatening to strike action, and analysts have warned that a stoppage could reduce global DRAM and NAND supply.

Elsewhere Amazon (-2.83%), Tesla (-2.28%), Google (-1.86%), Broadcom (-1.161%) and Cisco (-2.16% are dragging the Index lower. This wobbling has the S&P 500 Index down over 0.25%.

MU Jumps nearly 5%, But Amazon, Tesla, Google and Broadcom Weigh on S&P 500 Momentum

Pending Home Sales Rebound Supports Risk Appetite

Latest economic data showing that pending home sales gave a decent market pulse, rising 3.2% year-over-year after several soft months and a reading before near -1.1%. This mildly supportive data can add some buffer to the recent declines in the S&P 500 Index.

Pending Home Sales Rise 3.2% Year-Over-Year, Hinting At Firmer Housing Demand

S&P 500 Pullback With Weak Breadth

Short term market breadth has improved a bit but still remains below the critical 50% barrier. Additionally, when looking at the longer term S&P 500 Bullish Percent Index, it is below 50% as well. These aren’t good signs. We need broad market participation for this rally to continue because when those few stocks lose their momentum, we would see additional losses in the short and medium term for the Index.

S&P 500 Holds Above the 20-Day MA While Breadth Remains Below 50%

S&P 500 Renko Pullback Tests 50-SMA Support

When looking at the Renko chart I can see that the S&P 500 is off its highs and is finding support around the 50-SMA. Overall trend is upward with the bricks above its 500-SMA as well. But the shorter term indicators are posting some negative signs. The RSI is declining and below 50 along with the Z-Score SMA, which is declining and negative. Additionally the Supertrend has flipped negative. To re-ignite the trend we would need to see a reversal of these indicators.

20-Brick Renko Shows Slight Pullback in S&P 500 Index

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 7,240, 6,775

Resistance Levels: 7,450, 8,150

Medium Term Path: With a medium term view the S&P 500 still has a bullish structure. But the rally needs a bit of repairing before it can make a serious push back above 7,450 and then towards 8,150. The short and medium term market breadth indicators that I follow are both below 50%. Only a narrow group of leaders exist now. It really isn’t ideal if you are trying to make all time highs again. The only caveat is that the VIX is still below 20. So it is only a minor pullback at this point. We have to get the Momentum indicators trending higher again along with a positive flip in the Supertrend. That’ll boost my confidence. So in the interim we just wait.