Bad Breadth

neg30qtr

I track some breadth indicators, one of which the number of Russell 3000 stocks that are either up or down 30% in the last quarter (60 trading days to be exact). Above you can see how many are down 30% in the past quarter: it’s the highest we’ve seen in over two years. While I’m not one to predict things unless I’m sure I’ll be right, this demonstrates profound, sustained weakness. It’s not just a narrow spike, but a steady, inexorable climb.

July through November 2014 shows a strong increase in the number of stocks making the Neg30Qtr list.

So what about the positive side of things? Aka the Pos60Qtr meter?

pos30qtr

It’s been worse, but not much worse. At the same time October 2014 was showing a high number of stocks suffering greatly, it also shows there were many stocks doing quite nicely. A wider breadth, in other words.

Let’s look at the difference over time between the Pos30Qtr and Neg30Qtr indicators. Note the blue horizontal line is zero, i.e. there would be equal numbers of +30% / -30% stocks at the zero point.

dif30qtr

This is the most negative the Dif30Qtr indicator has been in two years. In fact, it’s worse than the “taper tantrum” of early 2014, and the plunge of October 2014.

Conclusion: while the market – or more specifically the S&P 500 – is maintaining a relatively narrow price band, the wider universe of stocks is suffering greatly. There is evidence to support this by looking at the S&P 500 Equal-Weight index, which shows considerably more weakness than the market-cap version. In other words, there appears to be a few giant companies propping up the index, which is hiding a weakness in the wider markets.

Sheesh, now I sound like a SeekingAlpha Bear-Monger.

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