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The Stock Market's Ugly Truth - Only 6 Stocks Matter

Tyler Durden's picture




 

When we first exposed the shockingly dire lack of breadth in US equity markets, it was shrugged off by the mainstream media as yet another 'worry' in the wall to climb. It seems, however, that facts inevitably force their way to the surface and so both Bloomberg (more than 100% of this year’s increase in the S&P 500 Index is attributable to two sectors, health-care and retail. That’s the tightest clustering for an advancing year since at least 2000) and The Wall Street Journal (Amazon, Google, Apple, Facebook, Gilead and Walt Disney Co. account for more than all of the $199 billion in market-capitalization gains in the S&P 500) have been forced to expose the ugly truth about US equities... it is not a stock market - it's a market of 6 tail-chasing momentum stocks.

U.S. equities are being pushed along by the fewest stocks in more than 15 years, which as Bloomberg reports, is a sign of fatigue in a bull market that already rivals anything since World War II in duration.

More than 100 percent of this year’s increase in the Standard & Poor’s 500 Index is attributable to two sectors, health-care and retail. That’s the tightest clustering for an advancing year since at least 2000, data compiled by Bloomberg show.

 

Breadth has fallen apart in a rally that is now the third longest since 1940, leaving investors exposed after three years without a 10 percent correction. Adding to concerns: the two industries shouldering this year’s advance trade at more than 22 times annual earnings -- a 20 percent premium to everything else.

 

“You’ve gone from a market which lives or dies by people’s feelings about the macro environment to a market that’s going to live or die according to the bottom-up beliefs of the prospect of a limited number of individual issues,” said Michael Shaoul, chief executive officer at New York-based Marketfield Asset Management, which oversees $5 billion.

 

Reliance on fewer and fewer companies has been a hallmark of maturing bull markets, most memorably the Internet bubble when six computer and software companies accounted for 55 percent of the S&P 500’s gain over the 12 months leading up to the peak.

This is so damningly exposed in the following chart showing the impact of the largest few stocks relative to the rest... and now we are seeing that correcting...

 

But it gets worse, as The Wall Street Journal reports, just a few companies are driving the gains in major U.S. stock indexes this year, raising fresh concerns about the health of the market’s advance.

Six firms— Amazon.com Inc., Google Inc., Apple Inc., Facebook Inc., Netflix Inc. and Gilead Sciences Inc.—now account for more than half of the $664 billion in value added this year to the Nasdaq Composite Index, according to data compiled by brokerage firm JonesTrading.

 

Amazon, Google, Apple, Facebook, Gilead and Walt Disney Co. account for more than all of the $199 billion in market-capitalization gains in the S&P 500.

 

 

The concentrated gains are spurring concerns that soft trading in much of the market could presage a pullback in the indexes. Many investors see echoes of prior market tops—including the 2007 peak and the late 1990s frenzy—when fewer and fewer stocks lifted the broader market. The S&P 500 is up 1% this year while the Nasdaq has gained 7.4%.

 

Other indicators are also flashing yellow. In the Nasdaq, falling stocks have outnumbered rising stocks this year, sending the “advance-decline line” into negative territory, a phenomenon that has come before market downturns in the past, investors and analysts said.

Bad breadth is everywhere in US equity markets...

Charts: Bloomberg

 

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Mon, 07/27/2015 - 12:32 | 6359302 Bill of Rights
Bill of Rights's picture

Comical, this is what you get under Government receivership folks...

Mon, 07/27/2015 - 12:39 | 6359325 PartysOver
PartysOver's picture

As more and more funds plow money into the 6 Pack, prices will only rise.  A rising tide lifts all ships until someone pulls the plug and the toilet flushes,

Mon, 07/27/2015 - 12:43 | 6359350 Clint Liquor
Clint Liquor's picture

All entertainment stocks. Entertainment is the first thing that gets cut when thing get tight.

Mon, 07/27/2015 - 12:52 | 6359383 Waylon Bits
Waylon Bits's picture

Teh we just closed his Ebay account (15 years old) and his Amazon account (7 years old) over this rebel flag bullshit!  Let's come together and boycott any company pushing political correctness!

Mon, 07/27/2015 - 14:50 | 6359860 Sanity Bear
Sanity Bear's picture

Traditionally, yes, but maybe not so in the brave new world we live in. Shit is so bad for so many people that they can only bear it if they can be entertained away from reality. Witness in Japan, people living in closet-sized Internet cafe booths, with the only thing keeping them going is their online fantasy lives.

Mon, 07/27/2015 - 14:08 | 6359680 monoloco
monoloco's picture

Same shit I've been reading on this site for the last ten years while I've made 100's of thousands of dollars in the stock market that's going to grenade at any moment. I'm glad I didn't listen to all the shit for brains, goldbugs here who advised loading up on the barbaric metal. How's that working out for y'all?

Mon, 07/27/2015 - 15:25 | 6359989 Four chan
Four chan's picture

you're a god, nothings going to change your world.

Mon, 07/27/2015 - 14:19 | 6359736 Duffminster
Duffminster's picture

Gilead is the one company in your list that is actually undervalued. In my opinion, the rest of Big Pharma doesn't like them because they actually cure diseases, not just treat the symptoms.  That would be a great trend if only the the "treat the symptoms till they die" wasn't top of mind for so many of the other Pharma giants who profit from voo doo science.

Mon, 07/27/2015 - 12:35 | 6359315 Panic Mode
Panic Mode's picture

Less than half actually make profits

Mon, 07/27/2015 - 12:36 | 6359319 silverer
silverer's picture

It's the old "all your eggs in one basket" gag.  It's sure to get some laughs soon.

Mon, 07/27/2015 - 12:36 | 6359320 chunga
chunga's picture

Shopping from home, internet searching, phone talking, social networking, movie watching, and infection drugs.

That's awesome.

Mon, 07/27/2015 - 13:02 | 6359411 mvsjcl
mvsjcl's picture

That's awesome if you're the NSA.

Mon, 07/27/2015 - 13:13 | 6359440 chunga
chunga's picture

LOL that's true!

Mon, 07/27/2015 - 12:36 | 6359321 KnuckleDragger-X
KnuckleDragger-X's picture

Well shit, the algo's are happy and the C-suite is getting their bonuses, what more could you want?

Mon, 07/27/2015 - 12:45 | 6359333 Winston Churchill
Winston Churchill's picture

More like halitosis than just bad breadth.

Mon, 07/27/2015 - 12:42 | 6359347 101 years and c...
101 years and counting's picture

banks have been supporting this pile of shit.  when they roll over, stocks will really start falling.

Mon, 07/27/2015 - 12:43 | 6359351 Soul Glow
Soul Glow's picture

Amazon has a great P/E.  Fucking great.

;)

Mon, 07/27/2015 - 12:44 | 6359354 stant
stant's picture

When did we see this before?

Mon, 07/27/2015 - 12:47 | 6359362 Winston Churchill
Winston Churchill's picture

73,87,2000, and 2008.Always different then as well.

Mon, 07/27/2015 - 12:50 | 6359375 Chad_the_short_...
Chad_the_short_seller's picture

It's put buying season. All I see is nice juicy shorts. Fuck the indexes.

Mon, 07/27/2015 - 13:40 | 6359555 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

With CapEx at an unusually low level, this should not come as a surprise.

Mon, 07/27/2015 - 12:50 | 6359377 Kaiser Sousa
Kaiser Sousa's picture

buy more stawks.....

sell all your "pet rocks"....

and Silver of course...

Mon, 07/27/2015 - 15:28 | 6360002 Four chan
Four chan's picture

i feel i have reached the perfect mindset, i just keep stacking and i keep buying cheaper. is this the definition of shangri la where every day is better than the last?

Mon, 07/27/2015 - 12:59 | 6359398 vq1
vq1's picture

oh calm down. snapchat, uber, pintrest, airbnb, dropbox and spotify add diversity to the market. All bringing essential services to our society. Creating tons of jobs and great products to boot!

Mon, 07/27/2015 - 13:02 | 6359410 The Count
The Count's picture

The freakin stock market is a bankster invention that has become a way of sucking the blood out of the economy, solely for their benefit. Our politicians are either stupid or corrupt (usually both) so that this goes on until nothing is left. Then the taxpayer bails out the banks, again. Rinse, repeat.

Just imagine what all that money locked into the 'markets' could do if it had to be spent on real world stuff!

Mon, 07/27/2015 - 13:28 | 6359493 joseJimenez
joseJimenez's picture

Imagine if we lockup all the bansksters causing the current economic distortion what  world it would be.

Mon, 07/27/2015 - 19:29 | 6360818 TweedleDeeDooDah
TweedleDeeDooDah's picture

You mean like "cured cancer"?

Who wants THAT?

Mon, 07/27/2015 - 13:02 | 6359412 mastersnark
mastersnark's picture

The 80/20 Rule has become the 98.5/1.5 Rule.

Mon, 07/27/2015 - 13:07 | 6359428 bigkahuna
bigkahuna's picture

Dont tell the machines, wait - tell them, lets see what happens.

Mon, 07/27/2015 - 13:36 | 6359484 Renfield
Renfield's picture

I'm not an equities person, so can I ask a couple of dumb questions about the article? How come it says that 2 sectors have lifted the index -- retail & healthcare -- but then later it says that only 6 stocks have lifted the index, of which 4 are social networking, and only 1 is retail (Amazon) and only 1 healthcare (Gilead)? I don't understand how both of these statements are true. Can someone explain? Also, does this mean we're confirming that banking stocks are now also net losers, despite free money handed out to them over and over by the central banks, via interest-free 'loans'?

Like I said, NOT an equities or money person. I'd appreciate any explanations out there.

Mon, 07/27/2015 - 14:24 | 6359732 g speed
g speed's picture

"It says" are quotations from MSM financial fishwrap  ---not to look to closely---

edit---by the way some of the stocks I was in and sold in 2004 are now at that same price level--- lots of suffering and nashing of teeth I didn't have to go through-- 

I'll see what happens after this year--maybe events will clean the markets out--maybe not--but untill I will be on the side lines.

Mon, 07/27/2015 - 13:37 | 6359495 Chuck Knoblauch
Chuck Knoblauch's picture

US government's top 6 drug money laundry companies.

Customer government spending illegally obtained cash.

Mon, 07/27/2015 - 13:37 | 6359533 buzzsaw99
buzzsaw99's picture

brawndo the thirst mutilator isn't on that list?

Mon, 07/27/2015 - 16:08 | 6360132 ParkAveFlasher
ParkAveFlasher's picture

Welcome to Costco, I love you.

Mon, 07/27/2015 - 13:52 | 6359617 Flatchestynerdette
Flatchestynerdette's picture

RIGHT NOW you can see us bouncing off of down -145 on the dow b/c the s&p is climbing from down -13 to -11.39 so of course the fed is buying s&p at 1:50pm to make it look good.

Oops now its s&p -10.09.

 

Seems disney or amazon just got something amazingly new and improved from yesterday.

Either that or Elon Musk is outright purchasing Google - right.

Mon, 07/27/2015 - 14:08 | 6359686 MFL8240
MFL8240's picture

Facebook is a joke of a company!  Worthless junk.

Mon, 07/27/2015 - 16:18 | 6360182 MrVincent
MrVincent's picture

Someday a book will be written called The Rise And Fall Of Facebook

Tue, 07/28/2015 - 10:49 | 6362862 Sorry_about_Dresden
Sorry_about_Dresden's picture

FB was financed by CIA venture capital fund.

Does this surprise you?

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