Market Breadth Is Getting Worse - How Far Is Too Far?
US market breadth has deteriorated sharply, but the headline indices and semiconductors still refuse to confirm a major breakdown.
In this update, Garry Davis examines what worsening market breadth, rising yields and widening credit spreads are telling investors - and why the strength in technology means the bearish case remains incomplete.
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The contradiction beneath the US market is now stark. Eight of the 11 major sectors are in downtrend, while the equal-weight S&P 500 has been falling for weeks. Yet the cap-weighted S&P 500 remains near its highs and the Nasdaq has just set new records.
At the same time, the bond and credit markets have become more concerning. The US 10-year Treasury yield finished around 5.28%, while high-yield credit spreads have widened materially. Garry describes the setup as a yellow light rather than a red light: the direction of travel is negative, but a major equity breakdown is still not confirmed.
Technology and semiconductors remain the major counter-signal. Their resilience in the face of higher yields and broader weakness says a great deal about the strength of AI-related demand and capital flows. The practical response is not to guess the next market move, but to stay selective, manage weightings and let price action dictate the probabilities.
Any advice in this video is general advice only. Neither your personal objectives, financial situation or needs have been taken into consideration. Accordingly, you should consider how appropriate the advice, if any, is to those objectives, financial situation and needs, before acting on the advice. Garry Davis (AR No:317590) is an authorised representative of Primary Securities Ltd (AFSL No. 224107).
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