The Stock Market's Underlying Weakness: The Charts

Here’s the daily price chart for the Nasdaq 100:

It’s same issue as with the S&P 500 chart: the red-dotted line connecting price peaks is upward but the relative strength red-dotted lines is downward.

The New York Stock Exchange Composite Index:

This index of 2000 stocks is no different from the S&P 500 and the Nasdaq 100: price trends upward but the RSI trends downward.

Despite the November new high for the S&P 500, the new high in the NYSE Composite and the not-quite-new high for the Nasdaq 100, certain underlying breadth indicators are signaling weakness. Warning: If you’re excited by how well your stocks have been doing, these charts may have a dampening effect on any enthusiasm.

The daily chart for the percent of S&P 500 stocks above their 200-day moving averages:

The red-dotted line connecting the April and late September peaks shows a clear downtrend in the percentage of stocks trading above their 200-day moving averages. This is going in the opposite direction of the index price, a negative divergence. A decreasing handful of S&P components is propping it up.

The percent of stocks in the Nasdaq 100 now trading above their 200-day moving averages:

It’s same basic story as the S&P 500: the red-dotted line is trending downward for this Nasdaq 100 measure. As the index climbed to new highs in July and in October, fewer components participated in the move. Nvidia and Tesla are fun to watch but focusing on them is missing the larger picture.

The percent of stocks in the NYSE Composite now trading above their 200-day moving averages:

Again, this breadth indicator peaked in July and now, even with a new high for the NYSE index itself, this measure is lower suggesting less and less participation.

Here’s the daily chart for the percent of S&P 500 stocks now in point-and-figure bullish chart patterns:

While the S&P 500 made a new high in late November, this breadth measure is not even close to a new high. It’s dropped from just above 80% in late September to 71% in late November. This negative divergence signals that profits are being taken under the cover of apparent strength.

The percent of Nasdaq 100 stocks now in bullish point-and-figure patterns

The peak arrived in mid-August at 75 and the measure has dropped to 71. It’s basically gone along with price so it’s hard to call it a negative divergence as such. Nevertheless, fewer stocks in bullish point-and-figure patterns tend to confirm the weakness seen in the inability of the Nasdaq 100 to hit a new high in late November.

Here is the percent of NYSE Composite stocks in bullish point-and-figure patterns:

This breadth measure shows a lower percent with Friday’s NYSE new high than with the October new high, a negative divergence.