Since its inception last October, this new bull market has been fraught with unprecedented anomalies and risks. Now, the reemergence of bearish Distribution in our Negative Leadership Composite (NLC) is raising a warning flag that could soon confirm the bear market is back in control.
This is not the first time that bearish Distribution has plagued the stock market this year. It initially reemerged in March when turmoil in the banking system led to three significant bank failures. While downside leadership quickly retreated after that, it has returned again, accompanied by growing negative divergence in small cap stocks with the Russell 2000 Index just 7.1% from hitting a new bear market low.
It’s extremely rare for Distribution to emerge in the first year of a new bull market, and virtually unprecedented for it to happen twice, as it has now. This warning flag clearly signals that market risk is again rising, and if this renewed Distribution breaks through the -50 level, it will likely confirm that the bear has reawakened…
