U.S. equities have been pushing toward new record highs this year, but the momentum has sputtered out in recent weeks. Nevertheless, investors who are concerned about further market pullbacks can incorporate a CBOE Volatility Index or VIX-related exchange traded fund hedge into a diversified portfolio.
A number of signals are pointing to weakening market momentum. For instance, the S&P 500 has had a hard time holding above its 50-day simple moving average, a sign of weakening trading momentum, reports Chris Dieterich for the Wall Street Journal. The longer the benchmark takes to break above this trend line, the sturdier this technical resistance will become, pressuring potential gains.
Looking at individual securities, the percentage of S&P 500 components trading above their 50-day averages has dipped to 46%, compared to 75% just one month ago. Bespoke Investment Group argued that the weakness has not reached extremes, which leaves further room for deterioration before the markets look “oversold.”
William Delwiche, an investment strategist at Baird, noted some S&P 500 components are hitting new 52-week lows and the number is rising. The proportion of stocks at their lows as the highest since early 2016.