Writing another note about bad breadth in the market would be about the most consensus thing that we can do. It is bad, and everyone knows it. The question is, “is it bad enough?” In the case of the difference between new highs and new lows on the NYSE, we would argue that it is not bad enough yet. At the same time, other metrics are confirming the bearish price action for equities. In other words, we are not seeing divergences that lead us to believe that a durable bottom is in place.

This is a chart that we have shown in the past but want to update for current data. We have been and remain of the view that there has not been a capitulation during this selloff. Often when the S&P 500 enters a correction, defined by a decline of 10% or more from the highs, the NYSE New Highs – NYSE New Lows fall to at least -40%. In the current cycle, we have yet to see a move of that magnitude in breadth.

On Monday, the metrics reached -30% as the S&P 500 made a lower low for this cycle. We view this as confirmation of the bearish trend in equities.

Perhaps that -40% level will be achieved soon? The percentage of stocks on the NYSE making new 52-week and six-month highs continue to increase. The 10-day moving average for both metrics is now at their highest levels since the pandemic, and both are still moving higher.

We have yet to see a divergence in the data that would lead us to believe that breadth is signaling a near-term low.

Another sign of confirmation of equity weakness is the NYSE’s Advance-Decline Line. It has been rolling over since the start of the year and is now making lower lows below the declining 50-day moving average.

Finally, when we incorporate volume, there is more confirmation. This chart depicts a 3-day moving average Advancing Volume over Advancing + Declining Volume on the NYSE. It has moved to a new low for the year.

Note that this metric is the lowest that it has been since the pandemic lows in the market.

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