Wednesday, August 01, 2012
Lack of Breadth - Small caps lagging
Lack of breadth doesn't bode well for the market. Once leading stocks are all breaking down or stalling. Market continues to be range bound. A healthy bull market is accompanied by a large number of stocks making moderate upward advances in price. A weakening bull market is characterized by a small number of stocks making large advances in price, giving the false appearance that all is well. This type of divergence often signals an end to the bull market. A similar interpretation applies to market bottoms, where the market index continues to decline while fewer stocks are declining.