Market Call: Bad Breadth Again

The stock market has a bad breadth problem again. For a while, it seemed to be attributable to the outperformance of the Magnificent-7. Many other stocks performed well, but not as well as the Mag-7. More recently, the outperformance seems to be narrowing to the Magnificent One, i.e., Nvidia (chart).

Technical analysts are warning that this development increases the risks of a selloff in the market led by technology shares in general and semiconductor shares in particular--especially Nvidia. Indeed, as the S&P 500 has been rising to new highs in recent days, the percent of S&P 500 companies trading above their 200-day moving averages has been falling (chart). That could signal a looming correction, though false positives have occurred in the past.