Here’s a remarkable fact that might be surprising to some: Nearly 40% of the stocks in the Nasdaq Composite are down at least 50% from their one-year high. And yet, the Nasdaq itself was only down about 7% at the start of the week.
That’s a pretty big difference. In technical speak, we call that a breadth divergence. It essentially means that just a handful of the big market-cap stocks are holding up the overall index.
This is a troubling sign. So far, the largest declines have been centered around small-cap growth stocks, but if the big guys start to roll over, there won’t be anything left over to pick up the slack, and the overall index could fall considerably.
Indeed, by the end of the week, it looked like the Nasdaq’s bad breadth had finally caught up to it. The Nasdaq Composite ended the week down bad, deep in correction territory, which is more than 10% off its all-time high.
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Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.