Broad Market Internals, October 3, 2014 
Volume ticked up modestly in Sep relative to the worst reading in history in Aug, but this was predominantly due to a surge on triple witching and the pickup on market weakness at the end of the month. Best readings were in Resources: Chemicals, Industrial Metals, Oil Equip & Svcs, and Industrial Mining.

Breadth has not picked up in Sep after initially starting to lag at the end of Q1 and turning poor through early Jul. At the best levels at the start of the month 52wk highs amounted to around a 1/3rd of the +2.5yr record from last May before collapsing into the end of the month, when the best concentrations were in Consumer Noncyclicals and Gas Distr, with the lows at a 3yr record last week.

Short term indicators - measuring the percentage of stocks above their 10-day moving average - have risen to mildly oversold after last week hitting the most extreme oversold levels since mid Apr, while the recently more important 25-day indicator registered the most oversold reading since late ‘11.

At the same time the intermediate 50-day indicator hit the most extreme oversold readings since fall ’12, after the prior advance petered out at the weakest reading on record.

Notwithstanding serious internal weakness, the magnitude of the recent broad market decline is of a similar degree seen Jul through early Aug and that does not yet seem consistent with the weight of the technical red flags that have emerged over the past few quarters. Near term the broad market is very oversold and should rally, but equally that is a position waterfall declines can develop from albeit with a small probability.

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