There are two subtle signs in S&P 500 breadth worth noting as we grind further into August.

First is the lack of new highs in the ratio of the S&P 500 equal weight index vs the S&P 500.  The ratio hasn’t made new highs since May.  In fact, this ratio has failed to take out 2015 or even 2014 highs.

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While that is notable and troubling, the trend of the 100 day MA has been what matters as a tell of market direction.  For now, that is trending higher.  This could become problematic in time.

 

Second is the lack of new highs in the S&P 500 advance-decline line as the Market made new highs last week.  This is the same signal that came at the market bottom in February, just on a shorter timeframe.

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So what does all of this tell us?  First facts, then theory

Facts:   Although participation has been strong, larger stocks are pulling more weight.  This is something to keep an eye on until it resolves.     

Theory:   Perhaps smaller stocks are getting pulled along by ETFs.  Also megacap stocks with attractive dividend yields such as AT&T and Johnson and Johnson have seen amazing rallies this year.  

Conclusion:  We see two chinks in S&P 500 breadth armor.  These charts aren’t foretelling doom, but they are worth watching until they resolve.  It’s possible they could become bigger issues in time.

 

Trade ’em well!