With earnings season pretty much out of the way and a sparse economic calendar, there’s not a lot going in markets this morning. While they are off their overnight lows, futures are little changed with a slightly negative bias, and treasury yields are slightly higher. Asian stocks also lacked much conviction overnight, although India was down over 1%. Europe has a more positive tone with the STOXX 600 trading up 0.2% and is being led higher by Spain (+1.3%) and Italy (+0.6%). That strength comes even as Industrial Production on the continent fell more than expected (-3.2% vs -1.8% forecast).

Yesterday was another one of those days in the market where the market rallied, and breadth stunk. While the S&P 500 was up 1.1%, the net advance/decline for the S&P 500 was a paltry +78, and 48 of those advancers were from the Technology sector. Just for the sake of reference, on Monday, when the S&P 500 was down fractionally, the net A/D line was slightly higher at +83!

You would prefer to see more stocks participating as the market rallies than less, but based on the last five years of trading, it hasn’t particularly mattered. Over the last five years, there have been 216 trading days where the market rallied more than 1%, and the average net A/D reading on those days was +344. In the chart below, we show the ten days when the S&P 500 rallied at least 1% that had the weakest daily breadth readings. On these days, the daily breadth reading ranged anywhere from -54 (8/26/20) to +156 (2/2/23). Looking at the chart, these relatively weak breadth readings weren’t a warning sign for the broader market. The only one where the market immediately fell notably was after the February 2023 occurrence, which ironically was the strongest breadth reading of the ten.

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