Not since the dot-com bubble have stocks thrown up this concerning metric
Markets have been volatile beneath the surface.
For some time now, it has been a feature of the U.S. stock market that a seemingly relatively serene S&P 500, currently sitting less than 1% from record highs, has contained some frantic and disturbing action beneath the surface.
These worrying signals keep coming, according to Jonathan Krinsky, technical analyst at BTIG. In a note published over the weekend titled "Something's gotta give," he argued that, while equity-market characteristics are "unsustainable," there are also concerning developments in credit.
The main issue is the lack of market breadth. The recent rally has been driven by a narrow group of stocks. Recently, for example, the market has seen the resurgence of many of the "Magnificent Seven" tech behemoths.
It's a trend that has had more bearish investors concerned for a few years, but now Krinsky has spotted a bad breadth signal that has delivered metrics not seen in a quarter of a century.
The S&P 500 SPX at the end of last week contained only 47.8% of its components above their 200-day moving average. At the same time, the index closed very close to a 12-month peak.
Krinsky calculated that there have been only 25 other days "that had less than 50% of S&P 500 stocks above their 200-DMA [while] the SPX itself was closer to a 52-week." All of those took place between 1998 and 2000, in the middle of the dot-com bubble.
Krinsky also said that there have just been nine consecutive days in which S&P 500 constituents' 52-week lows were greater than their 52-week highs, while the index was within 2% of its recent peak. That has happened only three times since 1990, he said: in December 1999; January 2000; and now.
Source: BTIG
From July 1999 through February 2000, the equal-weighted S&P 500 index XX:SP500EW RSP, which removes the outsize heft of market-leading big tech stocks, fell 16% while the market-cap weighted S&P 500 added 8%.
But they then reversed. The S&P 500 fell 17% in late December that year, while the equal-weighted S&P 500 rose 20% as investors moved away from the erstwhile highflying technology stocks.
So far the broad market has proved stoic. Krinsky pointed to the 213 trading days since the New York Stock Exchange registered an 80% or more downside volume day - likely because investors have shifted to and from sectors. The average calendar year contains 21 such days, and there's never been a year with fewer than five, he added.
"While the constant rotation has kept us from seeing a correlation-one selloff, we continue to think the clock is ticking, and we see one sooner than later," says Krinsky.
Source: BTIG
He said he's also wary of parts of the credit markets, noting that the spread between investment-grade and high-yield bonds is widening - traditionally a forecast of rising economic stress. "They are back to the wides of the summer when SPX was closer to 7,300," Krinsky said.
Furthermore, the cost of insuring high-yield debt in the technology sector, via credit-default swaps, is back at levels from the spring, while investment-grade tech CDS are at their highest since 2023, he notes.
For investment opportunities to keep an eye on, Krinksy highlighted consumer discretionary stocks, which have been hard hit of late by the surge in oil prices and bond yields. "Structural issues remain, but if there is any sort of resolution in the Middle East it's also the group that likely rebounds the hardest," he said.
His bounce candidates in this regard included Burlington Stores $(BURL)$, Brinker International (EAT), Yeti Holdings $(YETI)$ and Acushnet (GOLF), all of whose shares have fallen notably but "are coming into strong support levels," Krinksy concluded.
The markets
U.S. stock-indices SPX DJIA COMP are lower as Treasury yields BX:TMUBMUSD10Y rise. The dollar index DXY is higher. Gold futures (GC00) are sliding to around $4,182 an ounce.
Key asset performance Last 5d 1m YTD 1y S&P 500 7743.41 1.21% 0.41% 13.12% 16.55% Nasdaq Composite 27,068.72 2.06% 2.52% 16.46% 20.39% 10-year Treasury 5.233 27.70 47.70 106.10 108.90 Gold 4179.3 -4.60% -7.07% -3.53% 8.19% Oil 95.52 3.86% 10.67% 66.38% 51.19% Data: MarketWatch. Treasury yields change expressed in basis points
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The buzz
Oil prices (CL.1) (BRN00) are rising after U.S. President Donald Trump rejected an Iranian proposal to end the war and reopen the Strait of Hormuz.
Nvidia shares (NVDA) are higher after the chip giant said it would buy back an additional $150 billion of its stock.
Snowflake shares (SNOW) are falling after the software group said it is planning for a $3.5 billion offering of convertible notes.
SpaceX (SPCX) has launched its Starship rocket, the vehicle's first revenue-generating flight, according to CFO Bret Johnsen.
MongoDB stock (MDB) is sliding after the database company said its president and CEO has stepped down, effective immediately, for a position at Meta Platforms (META).
Federal Reserve officials speaking on Monday include governor Lisa Cook at 1:25 p.m. Eastern, and Richmond Fed President Thomas Barkin at 1:30 p.m.
Earnings highlights this week are likely to be Micron Technology (MU) on Wednesday and Nike (NKE) on Thursday.
New Jersey datacenter fined $1.1 million after visual investigation showed dozens of unpermitted generators.
The chart
Source: Apollo
Torsten Slok, Apollo's chief economist, said that many fintech companies are offering significantly higher yields for depositors than the banking sector. "Muse and similar agentic AI assistants could soon sweep household cash automatically into accounts paying 3.3% to 5.0%, instead of the 0.1% national average on checking accounts," Slok said. "If every household used AI agents to optimize the return on their cash balances, banks could lose a large share of the cheap deposits they rely on to make loans, which would be a problem for the entire financial system," he added.
Top tickers
Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.
Ticker Security name NVDA Nvidia TSLA Tesla MU Micron Technology AMZN Amazon.com SPCX SpaceX GME GameStop AMD Advanced Micro Devices META Meta Platforms AAPL Apple MSFT Microsoft
-Jamie Chisholm