As the SP500 trades at all time highs many stocks underneath the surface are not participating, in fact the amount of stock up 25% for the quarter has been down-trending while stocks down 25% in the quarter have been ticking up as you can see on the chart below.
What Should You Do With The Current Divergence That’s In Place
Now, its not fair to take the breadth of pretty much the entire universe of stocks and compare it to the SP500 which only tracks 500 stocks, a comparison the Russell 2000 is more of a fair comparison. With the Russell 2000 we see the same thing.
Divergences have been in place for a while. Breadth Divergences in 2013 was the most popular topic in the financial blog-sphere. I’m of the opinion that 99% of “bearish” divergences should be ignored in a bull market until they become so blatant that it forces you to take action and or price action confirms the divergence. The way I view this current divergence; go with the Index ETF’S over stocks at this very moment.
Stats via StockBee