So here we are, sitting at all-time highs in the major indices, yet BREADTH is ATROCIOUS.

On a day when the Major Indices (S&P 500 and the Nasdaq) hit all-time highs, we have;

• 1,176 fresh one-month lows vs 218 fresh one-month highs.

• 515 fresh three-month lows vs 123 three-month highs.

• The McClellan Oscillator ticked lower with a reading of -92. (The McClellan Oscillator is a market breadth indicator based on the difference between the number of advancing and declining issues on a stock exchange, such as the New York Stock Exchange (NYSE) or NASDAQ.)

• Stocks above their 40-day moving average also ticked lower with a paltry reading of 35.91. That means only 35% of stocks exceed their 40-day moving average. Let me remind you that the major indices are at all-time highs.

• We have more stocks down -25% or more in the last 65 days than up 25%.

• We have more stocks down -13% or more in the last 34 days than up 13% or more. (stockbee).

A few large stocks are driving the major indices.

Here are some interesting stats;

Here is the bottom line: 99.9% of the time, breadth divergence is USELESS. 

• If your entire portfolio consists of index funds like the S&P 500 and Nasdaq 100, then all this breadth divergence is 100% useless.

• But if your portfolio consists of many individual common stocks, you’ll now understand why there has been such a huge discrepancy.

• For those who swing trade, STOCK SELECTION HAS NEVER BEEN MORE IMPORTANT. If things continue as they are, then focusing on just the Russell 1000 might be the right thing to do.

• Since many stocks are not participating, shorting individual names might be a good strategy.

• 99% of breadth divergences right themselves by stocks catching up.

Since 2021, small caps have performed horrendous compared to large caps.

Small caps outperformed large caps for a very long time until 2021 when the weight of the FANG names started to make more of a difference in market cap-weighted ETFs like the $SPY and $QQQ.

 

Managed Assets.

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