U.S. markets had a nice bounce yesterday and they look poised for another bounce today, barring any hawkish comments from the Fed in today’s policy announcement. But all may not be fine and well as market internals have a real troubling look.
The chart below shows the NYSE cumulative advance-decline line for stocks compared to the S&P 500. The advance-decline line measures market breadth. The YTD trading range of the headline indices may be masking underlying weakness in the market that is evident in the downtrend in the A/D line. Narrowing markets are often a sign that stocks are running out of gas. Keep a close eye on market breath. If the A/D line continues its downtrend, a deeper correction could be in the cards.