Market Analysis

Thin to Win

Just a quick follow-up to my recent observations on weakening internals in The Deflating Rally. If recent internals were weakening then what we observed yesterday in the Nasdaq was a complete breakdown.

You wouldn’t know it from the actual indices, but look what’s happening underneath:

This is the cumulative advance/decline on the Nasdaq yesterday while the $QQQ closed positive.

On the day net advance/decline was – 1266 on the Nasdaq with $QQQ squeezing green into close:

Here are the number of issues

Over 2,000 Nasdaq stocks closed red. $QQQ green.

Why? Because 10 stocks in $QQQ control 53% of the index weighting:

And many of these closed green yesterday and hence this explains that.

Of course these same stocks are part of the $NDX, but how healthy is the $NDX on an internal basis? Not very:

Almost 40% of components are below their 200 day moving average:

New highs are reached with fewer and fewer components above their 200 MA.

And almost half of components are below their 50 day moving average:

But it’s not only tech, the weakness permeates everything:

Yesterday internals were negative all day, but on close all was saved with a big cap jam on close while a rising $SPX has been hiding the negative cumulative advance decline picture over the past several weeks.

The message: The larger market is correcting. The indices, thanks to the mega caps, are hiding it.

Thin to win.

Categories: Market Analysis

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3 replies »

  1. Another solid and to-the-point article … question that I have is with the repeated rotation of money into sectors along with broader market correction with the indices being propped up, do we (ever) get a real 5% healthy pullback?

    Maybe I am jaded and cynical, but I actually find it bullish that the entire market correction is being hidden away. Or maybe I am just disgruntled with my bearish positions : )


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