Drifting at Record Highs, 47% of Nasdaq firms are in Bear Markets

The milestone highs of the US technology heavy equity benchmark Nasdaq doesn’t seem to be revealing of its real conditions.

From the Bloomberg: (bold mine)

Beneath the U.S. stock market’s record-setting gains, trouble is stirring.

About 47 percent of stocks in the Nasdaq Composite (CCMP)Index are down at least 20 percent from their peak in the last 12 months while more than 40 percent have fallen that much in the Russell 2000 Index and the Bloomberg IPO Index. That contrasts with the Standard & Poor’s 500 Index (SPX), which has closed at new highs 33 times in 2014 and where less than 6 percent of companies are in bear markets, data compiled by Bloomberg show

This looks like a developing divergence or a possible deterioration in breadth or market internals of US equity markets as more issues from the Russell and the Nasdaq go into or enter ‘bear markets’. 

This means that the milestone highs seen at the benchmark must have been brought about mostly by index heavyweights, which has masked the deterioration over the broader markets. 

This also means of a developing divergence between blue chips (on one hand) and small caps and technology stocks (on the other). 

A healthy bullmarket would conventionally see a “rising tide lifts all boats” dynamic. 

Here is the Nasdaq’s chart…

And the Russell 2000 chart (for chartists, watch the RUT’s the making of a 'death cross')

Has these evolving divergence been in response to Fed Chairwoman Ms. Janet Yellen’s earlier irrational exuberance warning which she noted of “substantially overstretched” valuation metrics for “smaller firms in the social media and biotechnology industries”? 

Has these stocks been reacting to the closing of the QE 3.0 and the expected interest rate increases in 2015 or a rising US dollar? 

Has the latest phenomenon signified a healthy correction?  Or has this been the writing on the proverbial wall?

Interesting.