As you know, breadth has been so poor and no one has much cared. I ranted (and maybe raved a bit) about it Wednesday. But somehow or another, Thursday's market action saw those who shrugged two days ago getting a bit more concerned about it.
Perhaps it's because it was so glaring. I mean, when the S&P 500 rallies 36 points and a mere 32% of the volume is on the upside, maybe folks noticed that. Or that the Nasdaq rallied over 200 points and upside volume was 44%. Tough to spin that as "don't worry, be happy"-type stuff.
And I know breadth doesn't matter (until it does), but when you look at the chart of breadth (blue line) with the S&P since April you have to acknowledge that breadth made a lower low. But it's good news they say, because it hasn't gotten to the March low yet.
Or maybe they noticed that the number of stocks making new lows has doubled since Monday? And guess what? That new low list is not littered with banks this time. It has spread.
The New York Stock Exchange saw a big increase in stocks making new lows. It was the most since early May when the S&P was over 100 points lower.
Maybe that's why everyone seemed to go from "L.O.L. breadth doesn't matter" to "Wait a minute, this might be an issue."
I want to share with you a chart from Michael Kantrowitz, the Chief Investment Strategist at Piper Sandler, because I think it about sums up the market. It's the percentage of S&P 500 stocks that are beating the index on a trailing three-month basis. It is now at 20%. Yes, it's pretty scary that the last time it was this low was early 2000. But let's look at it closer.
It seems to me that the market spends the majority of time with 40%-60% of the stocks beating the index (I've drawn the blue lines). It doesn't get extreme often, but earlier this year it jumped up and over the range to highs not seen since 2000 to 2001 and now it's under it to the early 2000 peak. I think it exemplifies my point that when there are plenty of stocks participating it's easier to find winners (and losers) but when it gets extreme-on both sides-it urges caution as something is out of whack.
Finally a word about bonds. I have been looking for 3.9% on the Ten year ever since sentiment got extreme and we had that false breakdown in April. We are just about there and it seems folks have finally noticed the bonds. I think this rally in rates is getting a bit long in the tooth.
Wishing everyone a Happy Memorial Day!
