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Posted January 23, 2025 at 11:00 am
In theory, if not in practice, moves in major indices should be confirmed by breadth. We tend to focus on indices that are weighted by market capitalization, so many choose to check to see whether a wide range of stocks are participating in a rally that might be disproportionately led by the largest companies. The current environment features one of the most top-heavy index compositions in decades, meaning that a least recently, breadth hasn’t mattered. But historically it has, so we would like to check whether broad-based indices and advance-decline measures are keeping pace with the more concentrated indices.
One simple way to examine the relative amount of market participation is to compare the S&P 500 (SPX) with its equal-weighted version (SPW) and the NYSE Composite Index (NYA). We see that the latter two measures have performed similarly, but significantly worse than SPX:
Source: Bloomberg
Interestingly, when we compare the Nasdaq 100 (NDX) to the Nasdaq Composite (CCMP), the performance gap is far narrower. Part of the reason for CCMP’s better tracking vs. NDX as opposed to NYA’s tracking vs. SPX is because the megacap technology that are dominating that index are all Nasdaq listed:
Source: Bloomberg
Within the indices some advance-decline lines are keeping up with their benchmarks much better than others. For example, when we compare SPX to its cumulative advance-declines, we see that while the latest rally is not quite confirmed by the A/D line, it is not that far off. This comes, mind you, after a period in December when we went weeks with SPX decliners outpacing advancers, even as the index rose:
Source: Bloomberg
We see something similar with NYA and the NYSE cumulative A/D line:
Source: Bloomberg
Yet by the same measure, both NDX and CCMP fall far short. The Nasdaq cumulative A/D line has seemingly been in freefall even as the indices soar. That said, this has been occurring for years with few ill effects, if any:
Source: Bloomberg
Bottom line: for the most part, breadth has been keeping up with major indices. Certainly, there is underperformance when we compare SPW to SPX, and the drop in the Nasdaq A/D line is quite staggering, but on the whole, these should not be cause for immediate concern. Yet we have seen some index dips when the A/D lines fail to confirm new highs. It bears watching but not panic.
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Not panicking, but instead, steadily shorting both SPY and QQQ. It is pretty clear that Trump doesn’t know how tariffs work and he will mess up. He can also start a military adventure or suffocate the labour market by expelling workers in an already tight market. He can also scare foreign investments since the rule of law is dying in the US. So many possibilities. Counting the days for him to trigger a crash.
Obvious why you are anonymous
So are you
Have fun counting lol. I’ll buy from you and double in 4 years. Meet you back here then
Lool I told youuuu. It may be the start.
Sounds about right.
CCMP / NYSE relative strength has been poor since the Dec correction as well.
With the Fed ready to print unlimited $ on demand, nothing short of nuclear war would bring down these markets. What is truly terrifying is that Trump could make that worst case scenario come true during his term.
Anything can happen, and sometimes does. Even if it takes a bit longer than the overnight AmaZone delivery cycle, which is current standard for anything that really matters. Much like money, here today, gone tomorrow.
Seems to me T rump has been saddled with two wars started during the Biden administration.
Trump is a disgusting piece of slime who has no idea how to run the U.S.
An economist would respond “compared to who”? You lack perspective.
Biden is a disgusting piece of slime who has no idea how to run the U.S.
We’ve had slime running US for a long while. Pick your shorts carefully. Losers a plenty out there
Infrastructure rebuilding, lowest UE in 54 years and 48 consecutive months of job gains says otherwise.
My biggest losses were in 2000 to 2001 when the Nasdaq went from 5000 to 1000 and many of those companies like CSCO never recovered. I remember Putnam mutual funds losing 90 percent of their value. More than 10 years had to go by before they even got back to those highs. There was no safety in a diversification of tech stocks. Many took 15 to 20 years to recover to those highs even though the Nasdaq composite is now over 20000. Have fun and look at some of the big name stocks going back to their IPO date. Today I seem to lose money when CEO’ trash the opposition as in Quantum stocks. I also lose money when class action groups of attorneys pick on my chosen godlike stock. The did a great job of trashing the stock down daily using every news agency. I suppose you guys make money shorting those stocks. My third way of rapidly losing money is when our chosen darling stock managers with great fake earnings crook the books and then the stock price gets trashed. I am getting more nimble and getting out faster but I know the answer is to short. Got to get there! Neither Trump not Biden are worth losing any sleep over. Do not be a pawn in their game. Neither party give a continental for you anyway. Life is not either or. It is not even the middle ground. It is your own path.
Didn’t Michael Burry close out his short S&P position (Nov 2023) and take a 40% haircut for his effort? Good luck shorting the S&P…