S&P 500 Faces 9 Consecutive Days of Weak Market Breadth, Unseen in Over 20 Years
The U.S. inventory market is grappling with one other wave of “unhealthy breadth,” a phenomenon the place extra shares decline than rise, at the same time as main indexes present good points. This pattern has persevered for 9 straight periods, a rarity not seen because the aftermath of September 11, 2001, in line with BTIG technical strategist Jonathan Krinsky.
Market breadth, which compares the variety of advancing shares to these declining, has worsened considerably because the begin of December. Regardless of this, the S&P 500 has managed a modest 0.4% acquire this month, buoyed by energy in megacap know-how shares, together with the “Magnificent Seven.” Nevertheless, these good points masks weak point elsewhere within the index, elevating issues amongst traders.
The divergence is much more obvious when contemplating the efficiency of the Invesco S&P 500 Equal Weight ETF (RSP), which has fallen 2.5% this month. The ETF has declined for 9 consecutive days, marking its longest shedding streak since December 2018, when markets have been within the throes of a pointy selloff.
Sometimes, such dismal breadth happens when the S&P 500 is much under its file highs. In response to Jason Goepfert, senior analysis analyst at SentimenTrader, comparable episodes over the previous 70 years have coincided with the index being 12% under its peak, on common. But, as of Thursday, the S&P 500 was simply 0.6% off its file shut of 6,090.27, making the present scenario unprecedented.
The underperformance isn’t restricted to equal-weighted funds. Worth shares, tracked by the S&P 500 Worth Index (SPYV), have additionally struggled, with the index posting its longest shedding streak since 2000. Progress-oriented momentum shares like Palantir Applied sciences Inc. and AppLovin Corp. have faltered, whereas worth shares have seen even sharper declines.
As traders navigate this turbulent interval, some analysts predict heightened volatility in early 2024 as profit-taking intensifies. Regardless of this, the S&P 500 stays on monitor for a exceptional 25% acquire in 2024, doubtlessly marking the primary back-to-back years of 25%+ whole returns, together with dividends, because the late Nineties.
U.S. shares ended decrease on Thursday, with the S&P 500 down 0.5% at 6,051.25, the Nasdaq Composite falling 0.7% to 19,902, and the Dow Jones Industrial Common shedding 0.5% to shut at 43,914.12. Traders now flip their focus as to whether broader market participation will enhance or additional weak point will set the tone heading into the brand new 12 months.