Are Internal Market Cracks Turning Into Chasms?

Via Dana Lyons' Tumblr,

Recently noted deterioration in market internals appears to be getting worse, as evidenced by this rare divergence in the Nasdaq market.

One of the hallmarks of our intermediate-term Risk Model that helps orient our investment posture toward equities is breadth, a.k.a., internals. Internals measure the level of participation in the stock market, e.g., how many stocks are advancing versus declining, the number of new highs versus new lows, etc. The more participation there is, the broader the foundation for a market rally – and the more comfortable we feel being aggressively invested.

In recent weeks, we have published a series of charts and posts highlighting what appears to be a weakening of the internals, or participation, in the market recently. This trend has been interesting to note since the major large-cap averages have continued to trade near their all-time highs. That trend has not slowed down. In fact, it has arguably accelerated, as evidenced by today’s Chart Of The Day.

Today’s ChOTD shows that while the Nasdaq 100 (NDX) remains close to its 52-week high (i.e., less than 1% away as of yesterday), the number of new 52-week lows is now outstripping new highs on the Nasdaq exchange. Not only that, but the number of net new lows, i.e., new lows minus new highs, equated to more than 2.5% of all issues traded on the Nasdaq.

If that does not seem like a big number, it is actually just the 9th day ever that saw so many net new lows while the NDX was so close to its 52-week high.

As the chart suggests, prior occurrences seeing such conditions appear to have come at inauspiciously timed junctures. We’ve asked the question in our previous posts on “internal cracks” – do these examples constitute discernibly negative events? Or could they be mere coincidences or stat-foolery?

Comments

GUS100CORRINA spastic_colon Fri, 08/11/2017 - 09:08 Permalink

Are Internal Market Cracks Turning Into Chasms?My response: Does anyone really think or believe that any of the current market valuations represent reality?The disconnect between MAINSTREET and WALLSTREET is so blatantly obvious that even a 5 year old could see it. The real ELEPHANT in the ROOM is DEBT and CASHBURN per day.NO ONE SEEMS TO CARE ABOUT DEBT or that DAILY WE ARE SPENDING MONEY WE DON'T HAVE ANYMORE BY CONTINUING TO BORROW FROM THE FUTURE.Of course, the rescuing device everyone uses is that the CENTRAL BANKS have our backs, correct? If we get into trouble, they will just print (create out of thin air) more money like our friends at the SNB.At some point, the insanity has to end one way or another.

In reply to by spastic_colon

hootowl GUS100CORRINA Fri, 08/11/2017 - 09:34 Permalink

The Faux-Hebrew Babylonian/Persian/Khazarian/ bankster demons knew the mathematically-certain, inevitable end from the beginning, hundreds of years ago.  The inevitable economic collapse of the fraudulent fractional-reserve, debt-money, system has been inflicted upon this modern age by the ubiquitous infusion of financial error and the omission of basic financial truths surreptitiously inculcated by pernicious academic institutions, rife with misanthropic intent and a demoniacal agenda.  This imminent economic collapse was not an accident.

In reply to by GUS100CORRINA

eclectic syncretist Cognitive Dissonance Fri, 08/11/2017 - 09:21 Permalink

This might represent the first chinks in the armor of the "market" ultimately leading to much lower prices, but it's far too early to say. A 2%+ down day for the indices on ~3+ times normal volume and no obvious bad news would be substantially more telling as to whether it's time to seriously consider ponying up some cybernumbers on the short side for a longer-term trade. 

In reply to by Cognitive Dissonance

GooseShtepping Moron Fri, 08/11/2017 - 08:24 Permalink

The FAANGs aren't really companies anymore in the traditional sense. They are more like Deep State Directorates, funded by QE and economic repression. And they are the only stocks advancing. I wonder why?