A Sickly Market

Interesting comments from this weekend’s Barron’s:

In 2015, stock gains weren’t shared evenly. The market-cap-weighted S&P 500 index was boosted disproportionately by a handful of successful big caps. Jessica Binder Graham, a Goldman Sachs analyst, identified how many points these performers contributed to the S&P 500 index (SPY) level of 2044: Amazon (AMZN), 15.8; Alphabet (GOOGL/GOOG), formerly Google, 15.8; Microsoft (MSFT), 8;Facebook (FB), 6.5 points. If you exclude these names, along with four other big-cap gainers, the S&P 500 would have been down 4%.

The average S&P 500 index stock was down almost 4%, according to Bespoke Investment Group…

Confirming…weakness is another technical indicator: individual stocks already in a bear market, that is, down 20% or more from their respective highs. As of Dec. 28, 30% of the stocks in the S&P 500 index were in bear territory. That level has risen steadily: 23%, when the market peaked on Nov. 3, 19% in July, 15% in June, and 12% at the May peak…

Big-cap gains are masking poor performance elsewhere. About 37% of stocks in the S&P 400 Midcap index are down 20% or more, as are 46% of those in the S&P 600 Smallcap index. Typically, large caps are the last to roll over during the formation of a major market top…

A narrow market is a sickly market. Does it guarantee a major bear market? No. But it suggests that buying and holding the S&P 500 is probably a lousy bet right now.