Less than two weeks after triggering an initial cautionary signal, the InvesTech Negative Leadership Composite (NLC) just triggered a critical warning with bearish Distribution falling to a reading of -100. While Distribution reaching -100 does not guarantee a bear market, it is strong confirmation that we are in a very high-risk environment.
We have also seen market breadth deteriorate significantly this week as marked by a breakdown in the InvesTech A/D Divergence Index. This Index, which measures the trend of the Advance-Decline line compared to the expected trend in a healthy bull market, has fallen to a new 6-year low. This marks the most significant breadth divergence of the current market cycle, and it is another reliable signal that the market is more vulnerable to a downturn.
The combination of Distribution hitting -100 and a breakdown in the A/D Divergence Index is a critical warning of a market teetering on the edge, and it will be crucial to see if Distribution persists at this important level.