S&P 500 Nears Record High as NYSE Lags, Sparking Bearish Divergence
The S&P 500 is nearing its all-time high, while the NASDAQ Composite lags behind, sparking a bearish divergence. This disparity, coupled with a 'terrible' NYSE breadth, has raised concerns among investors and financial media. Currently, the S&P 500 is within 2% of its record high, indicating a bullish trend. Conversely, the NASDAQ Composite is over 4.9% below its peak, suggesting a bearish divergence. This discrepancy could signal a potential issue, as the NASDAQ Composite includes many foreign stocks that may not accurately reflect the U.S. stock market's health. The NYSE's breadth is suffering due to rising interest rates pushing bonds to 52-week lows and an increase in foreign listings. Despite these indicators, Troy Bombardia, the author of this analysis, suggests that these divergences are not yet a long-term concern for the stock market. Historically, six and nine months after such divergences, the stock market has risen 99% and 100% of the time, respectively. However, mainstream financial media is focusing on the 'terrible breadth' and predicting a market crash. Bombardia, who can be found on Twitter at @bullmarketsco and on his website MarketHistory.org, notes that traders often fixate on breadth indicators, but there are many such indicators, and one will always appear bearish. These NASDAQ vs. S&P 500 divergences have clustered around specific periods since the late 1990s and are becoming more frequent. While the S&P 500 nears its all-time high, the NASDAQ Composite lags behind, causing a bearish divergence. Despite concerns raised by mainstream media, Troy Bombardia suggests these divergences are not yet a long-term issue. Historically, the market has rebounded six to nine months after such events. However, investors should remain vigilant and monitor the situation closely.
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