On February 5th, the S&P 500 declined by 44 points. On February 29th (Last Friday), it declined by 37 points. So, what happened to short term market internals then and now?
Time-based comparisons of market internals helps uncover the nature of the move, or the general levels of conviction among traders, which incidentally, have not change much. The charts below show that the decline this time resulted in a much bigger jump in the number of stocks with a 5-day RSI below 30. But, this does not necessarily mean that the move this time is more bearish. Why?
Because, after the decline on February 5th, the market was relatively quiet. This causes the RSI to gravitate towards 50 (or neutrality), which makes it easier for it to fall below 30. Therefore, we cannot conclude that the move is more bearish on basis of breadth.
However, what is worrying now is the index’s inability to reach the high of 1396 it made on February 1st. This increases the likelihood that it may retest the lows. Watch out for a close below 1315.