As we continue our look at how out of touch with reality the stock market is, it is time to look at deteriorating market internals. Even though the indices are up and hitting all time highs very few stocks are following.
For instance, for the S&P on a monthly daily average only 26 companies are making 52-week highs. That number was as high as 200 just a little over a year ago. Or the market went from 1 out of about 2.5 stocks making new highs to 1 in 20.
In other words, fewer stocks making all time highs while major indices push higher mask a huge underlying issues known as market breadth. While not a significant issue in itself, when we combine it with today’s extreme overvaluation levels, rampant speculation, too much credit, VIX getting close to an all time low and seasonal/cyclical factors……..it becomes yet another warning sign.
As such, major indices setting in new highs is nothing more than a beautiful mirage.
