Bearish Distribution in InvesTech’s time-tested indicator, the Negative Leadership Composite (NLC), has emerged for the first time in over a year. This was featured as one of the “Big 4” Technical Indicators to watch in this month’s issue of InvesTech Research. As of the close today, it is now registering a level of -5 Distribution.
The triggering of Distribution indicates a possible acceleration in downside leadership and signifies that the stock market could be entering dangerous territory. This development, in conjunction with the market’s current levels of overvaluation, overconcentration, and overconfidence is a strong reason to treat this market with caution heading into the new year. If internal leadership continues to deteriorate, we will see Distribution fall through the -50 threshold which is a serious bear market warning flag, and it will be essential to further batten down the hatches in the Model Fund Portfolio.
