In July of last year, I published an update on market breadth. I noted then that 2018 highs were proving to be tough resistance for most stocks, even as each of the 3 major U.S. stock indexes had set new highs that week. After a brief August correction and improved participation on the next rally, stocks surged to records in the latter half of 2019. Now, a 35% drop and a rapid snap-back have brought us right back to where we started – the January 2018 highs.

Given that the S&P 500 is again testing the same levels, I decided to see how the index members have fared since we last checked in – Structurally, had breadth improved? Or were the majority of stocks again stuck below overhead resistance?

I won’t bury the lead. Less than 30% of S&P 500 stocks are above their 2018 highs. That’s fewer than during the breakout attempts in both April and July of 2019 (both of which failed). Structurally, breadth has not improved since last summer, and has arguably gotten worse. And just like last July, the sectors faring the best are those typically associated with safety: Utilities, Staples, Health Care, and Real Estate. Here’s the leaderboard:

Joining the leaders, of course, is the juggernaut that is Information Technology. The other cyclicals, though, are simply lagging. Member performance in Industrials, Financials, Consumer Discretionary, and Communications Services has gotten worse since last summer. Energy has been so bad that it now makes up less than 3% of the S&P 500 market cap.

Despite all that has happened over the last 9 months – trade wars, trade deals, global pandemic, you name it – it would appear nothing has changed. Here’s the wrap from July’s post:

Put simply, broad swaths of the market are still stuck below resistance – the median stock in the S&P 500 is 7.5% below its 2018 high. Participation could clearly be better, but it’s less clear whether it’s weak enough to necessitate another correction. Markets are regularly led by a few strong names, and they can drive prices higher for longer than anyone expects. One thing I’m sure of: a broadening in participation would be extremely healthy for stocks as we move forward, but the cyclical sectors have some work to do.

I couldn’t have said it better myself. The only difference between then and now? The median stock today is 18% below those highs.

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