Bad Breadth

The market of stocks has been a chop fest for the past month, prompting me to keep a close eye on market internals.

While trends in the major indexes remain unaffected, short-term weakness has been steadily creeping in beneath the surface.

The average 52-week drawdown of S&P 500 stocks has reached -18.2%. This means the average stock is experiencing its sharpest decline in over a year.

This kind of internal weakness begs the question of whether this is just a standard corrective wave within an ongoing bull market? Or are we witnessing the start of something more consequential, and even deeper drawdowns are ahead?

While there’s no need for alarm just yet, it’s crucial to stay mindful of how market participation is shifting.

For now, the indexes are holding strong, but the market has bad breadth.

I’d greatly appreciate your help in spreading the word!

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Have a good weekend!

Alfonso