Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Other than that rally last Thursday that caught a lot of technicians flat footed (i.e. post the Apple reversal) the breadth in this market has been relatively poor the past 5 sessions or so. The Russell 2000 has been lagging the major indexes dominated by large caps, and my watch lists have contained far more red than green. Some people have been calling it the NBA market (“Nothing but Apple”) but it’s been a bit broader than that – i.e. Microsoft has acted well, and some groups are still working.
A bearish take on this is of course what I cited above – breadth is narrowing which usually happens near tops. Fewer and fewer stocks are pushing the market forward; many more are faltering. The bullish take is “a correction is happening under the surface while the indexes hold in.” Obviously this market has not rewarded a bearish take in a very long time. So until we see at least a break of the 20 day moving average on a few major indexes it is difficult to continue to ride the bear, since he runs into a buzz saw every few days.
That said the transports I cited this morning continue to suck wind; the index is down another 1.6% and now sits right at its 50 day moving average. Oil continues to go up (at what point does that stop being “bullish”?).
While the action in some of the giants, especially tech, remains impressive – the market has become much more difficult the past month under the surface. A lot of stocks rally a few days and then give much/all of it back in 1 session. They churn while the big boys rally and take the indexes with them upward. To put it in perspective the NASDAQ contains about 3000 stocks but 10 of them are 35% of the weighting. It’s a different story than the first three weeks of January where just about anything that was not a leadership stock of late 2011 (i.e. utilities, boring healthcare, consumer staples) was rallying together.
Showcasing the lack of breadth, we are actually lower on the Russell 2000 than we were on jobs report Friday….
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