Divergent Trends in Market Breadth

A couple of weeks ago, we discussed the propensity for markets to go on runs or slumps in a manner not unlike what we can observe in baseball.  In that example, we looked at the percent of stocks in a particular region that are outperforming the MSCI World Index over the previous 65 trading days, noting that Europe and Asia-Pacific were the hottest markets around.

It can also be helpful to look at the evolution of the percent of companies outperforming over different slices of time, in order to get a better sense of the direction of the momentum in a market.  Overall, in the MSCI World, we note that the percent of companies outperforming over the 200, 100, and 50-day time periods has been relatively steady (50-55%)–however, that number dropped sharply over the last 20 days to as low as 45%.

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In MSCI Europe, the proportion of companies outperforming over the long (200-day) run remains under 40%, indicating room for further expansion.  However, in the medium-term (100 and 50-day time horizons), the percent of companies outperforming recently touched on historically high levels (60% or so) and appears to be weakening somewhat.

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Meanwhile, in North America, the percent of equities outperforming has slipped from recent highs of 65% over the last 200 trading days, to just 46% on a 100-day time horizon and only 38% when we look at the 50-day.

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Last we look at MSCI Pacific, where the percent of stocks outperforming has expanded from 54% to 73% to 75% over the respective 200, 100, and 50-day time periods.  And, with more than half of the companies in the region outperforming in the near (20-day) term, we see once again how strong the move has been compared to the other regions (all in the 40 percent range).

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