It’s no secret that we’ve been looking for evidence of improving breadth that would support last month’s breakouts in the small-cap and mid-cap indexes and provide fuel for a rally into the first quarter of next year. Instead we are finding evidence of the opposite - that rally participation is struggling to robustly expand. That’s the message when we look beneath the surface of the NASDAQ. The NASDAQ composite closed at a new high on the same day that the new low list rose to its highest level since March. March 2020. Another way to look at it (shown on the chart below) is that never in my career have I witnessed more NASDAQ stocks making new 52-week lows on the same day that the NASDAQ Composite made a new 52-week high. I don’t know if it will be the case this time, but when the market is heading for trouble, new low lists crescendo in size. This is not unlike tremors before an earthquake.
