Many are in disbelief of the market action, the indices continue to print highs while a majority of stocks are not following suit. It feels like a lot of money from small caps, energy, banks, biotechs is flowing out and flowing right into Facebook, Amazon, Netflix, Apple, Google, and Tesla.
As the Nasdaq Composite prints new highs every day the ten-day difference of Nasdaq stocks new 52-week high minus 52-week lows prints new lows.
We have 531 stocks up 25% or more in the last 65-days versus 506 that are down 25% or more in the last 65-days. That’s pretty even for a market printing highs,
SP500 vs. the 5-day average of stocks up 25% or more in the last 65-days minus the stocks down 25% or more in the last 65-days.
We also have more stocks down 13% or more in the last 34-days than we have stocks up 13% or more.
What is the solution to this? Own the index ETF’s; $QQQ, $SPY, $IWM, $ONEK. Simple.
Will this negative divergence finally catch up to the indices? Maybe. Individual stocks can also catch up to the indices and make all this bad breadth go away. Negative divergences, unlike positive divergences, don’t work that often and can last a very long time. On the days when the big liquid leaders (FAANGT) take a breather, the laggards bounce.
This slow grind up is rocking many to sleep.
Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at firstname.lastname@example.org or 646-480-7463.
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