META - Terrible Market Breadth: A Signal Of Future Economic Problems?
2024-06-30 09:00:39 ET
Summary
- US stock market breadth has been terrible. The extreme internal divergences are breaking historical records.
- Poor market currently constitutes a price signal of underlying fundamental imbalances that have been accumulating in the US economy.
- Poor market breadth in US equities has historically preceded business cycle recessions and associated bear markets in equities.
A judicious examination of the price action that is observed in equity markets, with the aid of select technical analysis indicators, can often provide important signals about fundamental conditions in the US economy. In this article, I will argue that extreme divergences in the "internal" price action of US equities -- as measured by market breadth indicators - constitute an early warning price signal that is warning of unhealthy sectoral imbalances that are accumulating in the US economy, with potentially serious implications for the current US business cycle expansion.
Review of the Concept of Market Breadth
In technical analysis, the concept of "market breadth" refers to the percentage of common stocks that are participating in a given price performance trend expressed in a broad market index. A "breadth divergence" occurs when indicators of market breadth significantly deviate from the price performance of broad market indices in a given period of time....
Terrible Market Breadth: A Signal Of Future Economic Problems?