Despite major US stock market indices at record highs, I posted about the seeming deterioration in market breadth/internals by the technology heavy index Nasdaq, where 47% of composite firms have reportedly been in ‘bear markets’ (20% loss from the apex).
Additionally, perhaps this weakening of market internals applies to the small cap Russell 2000, whose price chart has seemingly traversed into a bearish indicator, the ‘death cross’.
In short, even largest of the small cap firms may be experiencing price pressures.
Bespoke Invests’ chart of the advance decline ratio (advancing issues minus declining issues) of small, mid and large cap indices partly reveals of this unfolding diverging trends.
The rally in small caps appear to be fading (S&P 600) while Mid caps (S&P 400) seems to have plateaued. It's only the large cap firms (S&P 500) that continues to sprint ahead.
The ongoing deviation of market internals or a likely weakening of the current bullmarket seem as also a European phenomenon…
...as two thirds of the firms constituting the MSCI Europe have dropped by 10% or more.
The Gavekal Team at their Blog observed:
In the past, as the blue line has gone down (representing a rise in the percentage of companies with falling prices), the MSCI Europe (red line) has also fallen. While the overall index declined in the month of July, it has since stabilized-- in spite of more constituents generating increasingly negative performance. It seems only logical to conclude that there is decent potential for a more broad-based sell-off in European equities on the horizon.
Signs of things to come?