Weak breadth is troubling investors heading into November. Stocks wrapped up October at record highs, with the S & P 500 up more than 16% year to date after climbing a wall of worry that most recently included rising trade tensions between the U.S. and China. The broader index has now advanced for six straight months off its April lows. But a look beneath the hood shows just a few stocks have participated in that rally. A comparison of the market cap weighted S & P 500 (SPY) , versus the equal-weighted index (RSP) , shows breadth is at its lowest going back to 2003. That’s a signal of poor breadth that is troubling investors when the stock market itself is at all-time highs. “The fact that we’re at new highs, and the RSP is dropping … is not that unusual, but the level is. And it is ironic that we’re lower at the highs right now than we normally were at the lows, ’08, ’09, and 2020,” said Peter Corey, a chief market strategist at Pave Finance who pointed out the move. “It just shows how incredibly one-sided the market is in terms of the way it’s looking at things.” The strategist is not the only one to point out the poor breadth lately. JC O’Hara, chief market technician at Roth Capital Partners, wondered how much longer big tech stocks can carry the load when just 40% of the overall market are trading above their 50-day moving average. On Friday, JPMorgan head of technical strategy Jason Hunter said a thin rally historically means equities have run out of steam, but he also said the relentlessness of the AI theme could mean the market can get past those concerns once again. Recent technical signals are pointing to “rally exhaustion, but [these] are also conditions that have been in place on many occasions throughout the evolution of the rally in recent quarters, which have had little to no impact most of the time,” Hunter wrote. “That dynamic is what drove us to transition to more of a trend-following approach in 2024, a strategy we still suggest employing.” “At this point, we see little evidence of anything that looks like a distribution pattern in the benchmark large cap index charts, or any of the leading group charts (mostly associated with the AI-theme),” he added. Indeed, Pave Finance’s Corey said the best thing investors can do is keep their finger on the trigger, and brace themselves for a major move. Either stocks are able to find a catalyst for the next leg higher that’s able to lift the broader market with it, or a sell-off in tech stocks could drag the market down with them. “You have to look at market direction once this starts to reverse,” Corey said. “Because it’s going to be very good or very bad.” — CNBC’s Chris Hayes contributed to this report.
