Market Internals Could Be Improving. Here’s How to Follow the Trend.

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Some positive trends could be developing beneath the surface of the stock market, according to TradeStation analytics.

A growing number of companies in the S&P 500 and Nasdaq-100 are above their 200-day moving averages. The change comes despite the indexes remaining below their 200-day MAs. That improving breadth may suggest widening risk appetite and greater demand for equities.

This article will explain how to discover potential opportunities with the help of our award-winning platform.

Using Scanner

TradeStation’s Scanner can easily discover stocks above a key technical indicator like the 200-day MA.

First, open Scanner from the Apps menu. Look for the flashlight icon.

Then click the “Create Scan” button at the top left. A dialog box will appear asking for a name. Type in “Stocks above 200-day MA” (or something else), and click Next.

The following screen is “Symbol Universe.” This lets users decide which stocks to include (or exclude) from the search.

In the top section titled “Symbols to Include,” select TradeStation Symbol Lists → Index Components → S&P Indexes → S&P 500 Index. Click Next. (The Nasdaq and Dow Jones are also available.)

The following page does most of the work, letting users choose from a wide range of criteria. We’ll add a single line in three steps:

  1. Click on <Select Criteria> → Price → Last. (Use the “last” price. Open, high and low are also available.)
  2. Then in the Operator column, select the “greater than” symbol: >
  3. In the Field/Value column select “Indicator…” A dialog box will appear.
    • Scroll down the list and select “Mov Avg 1 Line.” (This adds the moving average.)
    • Next, click on “+” button on the left. (This will expand the fields to let you customize the moving average.)
    • On the right, change the “Length” to 200. (This specifies the 200-day MA.)
    • Also make sure Price is set to “Close” and Interval is set to “Daily.”

This tells Scanner to find S&P 500 members whose last price is above their 200-day MAs.

Scanner criteria input. Boxes show fields to change. Arrows show fields to check.

200-Day Moving Average

Moving averages can help detect trends because they smooth out prices over time. Stocks above them may be trending higher and stocks under certain moving averages could be moving lower.

While technical analysts can use any length of moving average, the 200-day period is a common setting for long-term views. Investors may view stocks that are above their 200-day MA as potentially attractive.

TradeStation also provides custom symbols for customers to know how many members of the big indexes are above their 200-day moving averages:

S&P 500$200DMAASP
Nasdaq-100$200DMAAND
Dow Jones Industrial Average$200DMAAI
Russell 2000$200DMAARL

Bullish Divergence

Interestingly, the ranks of stocks above the long-term trends is rising. TradeStation data on Wednesday showed as many as 298 members of the S&P 500 above their 200-day MAs, the most since January 20.

It was also 49 more than mid-August, when the index was 7 percent higher. That’s a potential example of “bullish divergence,” with internals improving more than the overall index. (This subject was covered in our recent webinar on market breadth.)

The improvement occurs at a time when other conditions like supply chains, Federal Reserve policy and volatility could be returning to normal. The S&P 500 is also headed for its second straight positive month in November, something it hasn’t done since the summer of 2021.

In conclusion, the S&P 500 remains 16 percent below its record high following three quarters of heavy selling. However the number of companies above their 200-day moving averages could signal changing sentiment beneath the surface. TradeStation users looking to find beneficiaries of the new trend might consider finding them with the steps outlined above.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.