I have been in the finance industry for 18 years, I spent 13 years as a Series 7 broker, I have many friends on the street that I talk to regularly. I also have a presence on Wall Street 2.0 which is twitter/stocktwits. I believe that the people I follow on the social media front are smarter than my broker friends when it comes to the market (that does not mean they are better at investing/trading/making money). However, my broker friends are actually involved in the business, moving money around while some from the Wall Street 2.0 are not. As of right now they’re pretty much at opposite ends. The brokers are saying “all my stocks are getting crushed“, while the bloggers are pointing at how the SP500 cumulative advance decline line is near highs and there is absolutely no reason to complain. According to Urban Carmel 75% of the total U.S. market cap are represented by the SP500, so it does a good job representing the market. On the other hand the Russell 3000 consists of 98% of the investable U.S. equity market.
The bloggers are pointing out the chart below. Advance-Decline Percent is a breadth indicator that measures the percentage of Net Advances. AD Percent = (Advances Less Declines) / Total Issues. As you can see it is trading near highs chugging right along with SP500.
The brokers that I’m talking to are probably not involved with too many SP500 names. Their universe is normally the smaller names. Regardless, they might be on to something. Currently we have 1,306 stocks down 13% or more in the last 34 days versus 706 that are up 13% or more in the last 34 days. We also have 879 stocks down 25% or more in the last 65 days compared to 352 that are up 25% or more. As you can see from the charts below, the amount of stocks trending lower has been rising in the last couple of months while the ones trending higher have been on a decline. This may be the reason why brokers are complaining that their stocks are getting crushed.
Russell 2000 versus stocks up or down 13% or more in the last 34 days.