S&P 500 performance, breadth hit one of its biggest dislocations

S&P 500 (^GSPC) performance and breadth have hit one of the biggest dislocations in 30 years. Fundstrat Global Advisors managing director Mark Newton and Yahoo Finance's Julie Hyman join Asking for a Trend to discuss the move and the index's trajectory.

Hyman notes that the index's performance has largely been driven by the tech sector. However, as the index reaches new heights, the number of stocks participating in that upward momentum trails behind.

Fundstrat Global Advisors managing director Mark Newton tells Hyman, "It doesn't have to mean that the market is going to go into a correction or roll over. Those tech stocks can continue to go up and that divergence can get wider and wider, similar to what we saw back in 2021. However, we can also see what I think is going to happen is as a start of the broader market to play catch up. And we've seen a little bit of that in financials over the last week."

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Melanie Riehl

Video transcript

S and P 500 Performance and breath hit One of the biggest dislocations in 30 years.

Yah finances Julie Hyman joins me now with a closer look.

Julie.

Yeah, Josh, we've been talking so much recently about breath, right?

How many of the stocks in the various industries are participating in the rally And the answer is not that many, right, Because they're being carried by big stocks.

So Bloomberg Intelligence has one particular look at this.

So this here is just the 500.

And of course, we've been seeing it climb and climb and climb, making new records on a pretty regular basis.

Now take a look.

Overlaid with that is the percentage of stocks in the S and P 500 that are trading above their 200 day moving averages that have broken out that have participated in that same momentum.

And as you can see here, there is a divergence.

The S and P is going up, but the number of stocks that are really participating in that upward momentum is not participating to the same degree.

And then we've highlighted a few areas here because these are areas that Bloomberg intelligence has highlighted here back in 2001 and then 2003, when we saw similar gaps here.

So it's near the widest that it has been between the S and P and the percentage of companies within it trading above that moving average.

It's the near the widest we've seen in 30 years.

Indeed.

So as you Julie, look through these charts for investors watching right now and traders does it suggest a potential slump could be coming?

Well, it depends on who you ask, as is typical with these kinds of situations here.

So the folks over at Bloomberg Intelligence they looked at these two other times in 2020 one and in 2023 and after that, we did start to see some movement downward in the S and P 500 so they say it could portend a slump.

We also earlier talked to Mark Newton of Fund Strat, and he did not seem as concerned about this particular indicator.

It doesn't have to mean that the market is gonna go into our correction or roll over.

Those tech stocks can continue to go up, and the divergence can get wider and wider.

Similar to We saw back in 2021.

Um, however, we can also see what I think is gonna happen is as a start of the broader market to play catch up.

And we've seen a little bit of that in financials over the last week.

So he thinks 5650 is what we're gonna see on the S and P 500 before the end of the year and then perhaps a little bit of downward pressure.