Stock Market Rally Takes A Break: Breadth Indicators Show Weakness

The stock market rally from the spring lows is taking a break.

The S&P 500, the Nasdaq 100 and the Russell 2000 have rallied significantly off of their early April lows but there’s a problem. The lack of breadth makes it hard to get too excited even as the indexes approach old highs: the NYSE index of advancing issues versus declining issues isn’t keeping up.

Nor is the “bullish percent index,” another of the indicators failing to confirm the strength of the up move from April to now. That investors over that time period would have been better off in gold and silver, which last week both made new closing highs, is something to consider.

Stock Market Rally And Weakening Breadth

The daily price chart of the S&P 500:

The large cap index has dipped below the uptrend line connecting the April low with the May low. The selling came in as the price moved up toward the February peak. The unfilled gap up in early May may be a target for this sell-off. That would take it below the uptrending 200-day moving average.

The daily price chart of the Nasdaq 100:

The index with the hottest tech and social media stocks dropped on Friday to below the uptrend line that had connected the early April low with the late April low. The Nasdaq 100 could not quite make it back to the February high. Both the 50-day and the 200-day moving average remain in uptrends.

The daily price chart of the Russell 2000 small caps ETF:

The Russell 2000 is much weaker than the S&P 500 and the Nasdaq 100: it was unable last week to close above the 200-day moving average. The “rally” off the April lows remains well below the November 2024 high and the February 2025 high. Note the heavy volume that accompanied Friday’s selling.

The NYSE Advance/Decline index:

The closely watched breadth measure peaked in early April. As the S&P 500 and the Nasdaq 100 moved higher in May, the advance/decline line failed to make a higher high. Fewer stocks were advancing and more were declining. With last week’s sell-off, this measure is readjusting.

Percent of stocks in bullish point-and-figure patterns aka “bullish percent:”

The index peaked in May and, even though the stock indexes were higher in early June, this index failed to move higher. That’s a negative divergence in a significant breadth measure. Here is the Stockcharts.com explanation for how the bullish percent is calculated and the reason classic point-and-figure patterns are used.

Here’s the daily price chart for SPDR Gold Shares:

Friday’s closing price is a new high for the shares.

The iShares Silver Trust daily price chart is here:

This is the silver fund designed to reflect the price of the metal. The new high came on Monday and backed off a bit from there.

Stats courtesy of FinViz.com. Charts courtesy of Stockcharts.com.

No artificial intelligence was used in the writing of this post.

More analysis and commentary at johnnavin.substack.com.