The chart provides a comprehensive analysis of market breadth in relation to the S&P 500 Index (SPX) as indicated on the CBOE. The chart is divided into two main sections:

Top Section (Market Breadth Indicator):

The top part of the chart displays the market breadth indicator, which measures the number of stocks advancing versus those declining.

There are two significant periods labeled “New Market Highs,” indicating times when the breadth indicator showed robust market participation as the index reached new highs.

A yellow horizontal line at the 50% level represents the threshold for positive breadth.

In the latest period, marked as “Worst breadth at new highs this year,” the indicator shows the weakest market breadth despite the index reaching new highs. This suggests a divergence where fewer stocks are participating in the rally.

Bottom Section (S&P 500 Price Chart):

The bottom section is the price chart of the S&P 500 Index, showing its performance over time.

The index has been trending upwards, achieving new highs as indicated by the green line and the annotations.

Each new high in the index is correlated with the breadth indicator above, showing whether the highs were supported by a broad market rally or not.

Key Observations:

During the earlier periods of new highs, the market breadth was strong, indicating widespread participation in the rally.

The latest new highs in the S&P 500 Index have been accompanied by the weakest breadth of the year, suggesting that fewer stocks are driving the index higher.

This divergence could be a warning signal for the sustainability of the current market rally.

Overall, the chart indicates that while the S&P 500 Index continues to hit new highs, the underlying market breadth is weakening, which could imply potential vulnerabilities in the market’s strength.

https://linktr.ee/jasonregalado