Bad Breadth Again

The ratio of the equal-weighted to market-cap-weighted S&P 500 stock price indexes is an interesting measure of market breadth. It is available daily since 1990 (chart). Based on this limited period, we can see that the ratio tends to rise following recessions and to peak before recessions. It bottoms just before or during recessions.

The same pattern seems to apply to this ratio  during bull and bear markets (chart). This suggests that during economic recoveries when bull markets are relatively young, more and more stocks participate to the upside. Once the bull market has aged, fewer stocks participate and/or a relatively small number of large cap stocks tend to lead the market higher.