Following a volatile afternoon trading session, the Nasdaq Composite closed up +0.6% yesterday, hitting a new all-time high. Under the hood, however, a rare technical warning occurred, as there were more than twice as many stocks declining as those advancing.
The Nasdaq has only hit a new all-time high with declining issues outnumbering advances by more than 2 to 1 twice in its 54-year history. The only other time this occurred was on November 18, 2021 – one day before the Index peaked. The bear market that followed saw the Nasdaq suffer a decline of -36% over the next 13 months. It took over 2 years for the Composite to hit new highs again.
Yesterday marks the worst breadth on the Nasdaq exchange when the Index hit a new all-time high, a concerning signal that history tells us should not be ignored. Rapidly deteriorating breadth in this tech-heavy index is a key warning that the overall market could be nearing a turning point. It will be critical to watch InvesTech’s Negative Leadership Composite (NLC) in the coming weeks for an appearance of bearish Distribution as a signal that leadership is confirming this bearish breadth development.