The Advancing-Declining Volume Line (AD Volume Line) measures the buying and selling pressure behind a market advance or market decline. It goes up when advancing volume is positive; it falls when it is negative. In other words, if there is significant volume behind declining stocks, you have selling pressure and reason for caution. The pressure today is powerful enough for the volume behind decliners to push the AD Volume Line for the S&P 500 below its 200-day moving average for the first time since 2012.
We can also look at the Advance/Decline (A/D) Line for the S&P 500. Although there has not been a definitive breakdown in the number of advancers participating in the bull market relative to decliners, the drop-off since mid-May is worthy of continued vigilance.
Finally, investors should be mindful of the High-Low Index, This breadth indicator is based on new 52-week highs and new 52-week lows. In essence, when the High-Low Index is above 50, the stock index may be thought to be in an uptrend; when the index is below 50 – when new lows outnumber new highs – the trend may be considered bearish. The S&P 500 Hi-Lo at 56.67 is still positive today, though it sits at its lowest level in 2015.
Income assets have been trimmed at the longest-end of the yield curve as well as the middle of the asset risk spectrum. We have concentrated our income in funds like iShares 3-7 Year Treasury Bond ETF (NYSEARCA:IEI) and Guggenheim BulletShares 2016 (BSJG). Most notably, we have raised our cash component of the income picture.
Growth assets have been trimmed in the foreign holdings arena. Several had hit stop-limit loss orders, leaving the combined cash from growth-n-income trimmings at roughly 15%-20%. Growth at 50%-55% of most portfolios is primarily comprised of funds that we have held onto for years, including funds like Health Care Select Sect SPDR ETF (NYSEARCA:XLV), iShares USA Minimum Volatility (USMV) and Vanguard Mid Cap Value (VOE).
