Are Market Internals Weakening?


The chart below plots the SPX along with the ratio of NYSE advancing issues vs. total issues.

As you can see in region (A), the ratio has put in a succession of lower highs and lower lows over the past two months even as the SPX has registered higher prices.

This is a bearish divergence.

This isn’t a timing tool as the market often times puts in multiple % points of additional upside before any pullback occurs.

However, more often than not such degradation of internals does precede pull-backs, as the chart suggests.

The question tends to be “when”, not “if”, such pull-backs are coming.

Impossible to tell when any pull-back occurs, but it does seem internals are suggesting one is on the horizon.

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