The S&P 500 index advanced to within 1% of its record high on Monday while its constituents simultaneously registered more 52-week lows than highs, triggering a market signal observed only twice in the past century.
Historical Market Breadth Signal
On Monday, the S&P 500 rose 1.49% to close at 7,764.70. This places the index 0.67% below its 52-week high of 7,816.70. Despite the top-level index gains, internal market participation deteriorated.
According to Jason Goepfert, founder of SentimenTrader, there are only two dates in history when the S&P 500 rallied at least 1% to within 1% of a new high while more of its component stocks fell to new lows than highs: July 23, 1929, and Dec. 21, 1999.
“We’ve never in almost 100 years seen breadth this bad,” Goepfert posted on social media platform X. “The S&P $SPY is knocking on new highs but there are (many) more stocks at lows than highs.”
Goepfert noted that the percentage of stocks in long-term uptrends is plunging. Factoring in historical market contexts, he stated that “out of 83 dates with similar or better participation, the S&P rallied over the next year only 16% of the time.” Consequently, his firm’s price projection is now negative for the first time since they began publishing the data six months ago.
Under the Surface of the Rally
During Monday’s session, 30 stocks within the S&P 500 hit new 52-week lows, while only seven reached fresh highs. Art Hogan, chief market strategist at B. Riley Wealth, told CNBC that the divergence was a result of current sector leadership.
"The leadership’s battling against weaker performance in the near term, and what’s selling off has been selling off, so the creation of new lows has an easier glide path than the creation of new highs with today’s leadership," Hogan said.
Hogan indicated that the market could experience similar sporadic trading days moving forward. He sees no new highs in this market if the war persists, energy prices remain stubbornly high, and if the Fed continues to hike rates.
How Has the Index Performed?
The S&P 500 index has advanced 13.43% year-to-date. Similarly, the Nasdaq Composite index was up 16.69%, and the Dow Jones gained 8.29% YTD.
On Monday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed higher. SPY rose 1.55% to $773.50, while QQQ rose 2.88% to $741.47. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.76% higher at $519.78.
In premarket on Tuesday, SPY was up 0.62%, QQQ advanced 0.94%, and DIA gained 0.61%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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