The Combover and Market Breadth
Much like my hairline, the number of stocks covering the bald patch in US equities continues to thin…
Last time we looked at this chart (1st June here), equities were about to dip lower.
Now with the European mess behind us, equities have all but recovered that lost ground. It’s just that this has been achieved with fewer and fewer stocks pushing higher relative to their more pessimistic siblings.
Declining market breadth suggests a lack of conviction in the most recent recovery.
So will the inevitable resolution of the US debt ceiling debates clear the way for broader participation – and maybe even new highs in the S&P500 index?
Perhaps – though maybe the markets have overestimated the ability for politicians to amicably resolve the issue.
In any event, without a meaningful break higher in market breadth, we’ll be waiting for the return of the government stimulus machine before adding meaningfully to long positions.