Large cap breadth starting to fail

16 October

For the first time since the new bull market started in March 2009, large cap stock breadth is starting to fail. The chart shows the S&P 100 Index (OEX) and the cumulative advance/ decline line for these stocks.

Divergence appears for the first time in this bull market. This data only begins at the start of 2008, so we don’t have a long track record to judge this indicator on.

I just put this out as something to be aware of. There are other breadth indicators that do not show divergences and I will do a bigger recap later this week. The consumer discretionary sector is factor in creating this divergence.

Remember that a breadth divergence does not automatically mean price will fall immediately, just that it makes the uptrend vulnerable.