WSJ Marketbeat reporting: Analyst: Fewer Stocks Doing the Heavy Lifting = Not Good
Last week, Brown Brothers Harriman told us about how corporate profit margins were in danger. Now, they’re back again to tell us our rally may be kaput — or at least in trouble.
Ari Wald, a technical analyst for the firm, notes that the number of S&P 500 companies setting new 52-week high has shrunk as the rally has advanced. On Feb. 3, the net new 52-week highs — that is, the number of New York Stock Exchange companies at 52-week highs minus the ones at 52-week lows — peaked at 280 companies. At that time, the S&P 500 was at 1345.
By March 13, though, despite the S&P 500 tacking on another 50 points to trade roughly at the level we’re at today, there were just 170 net new highs, Mr. Wald points out. And as of today, there are 63 stocks at a 52-week high, and 25 at a 52-week low, for a net of 38.
“This is a bearish sign of selectivity that tends to occur when strength by big-cap stocks masks weakness in the broader market,” he warns, adding that this sort of behavior is typical of “a tired trend, and becomes worrisome when it persists through longer periods.”
The concern is that just a few stocks are “doing the heavy lifting,” which he notes, “is not a healthy sign.” The Dow is off 90 points with less than an hour to go in trading.
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S&P 500 Index 52 Week Highs/Lows
NYSE Composite Index 52 Week Highs/Lows
At least we know what some of the pros are worried about for now.