While CNBC and the financial media continue to rave about stocks being near their all-time highs, beneath the surface of the market we are seeing signs of big trouble.
Consider the following…
As Michael Batnick noted last week, the S&P 500 as a whole is just 1.6% off its all time highs, but the average stock is down 9.6% from its 52-week high.
Put another way, while the overall index is being held up by a few names, a significant number of companies are already in full blown corrections.
Note the large divergence between the S&P 500 and the number of S&P 500 companies above their 50-DMAs. Momentum is clearly rolling over here.
Speaking of which…
US Steel (X), which has been a poster child for the “Trump economic utopia” trade has taken out critical support (red line) as well as its election night rally trendline (blue line). The momentum here is gone.
Another economically sensitive company, copper producer Freeport McMoRan (FCX), has not only taken out critical support but has already erased virtually all of its “election” rally.
Finally, high yield credit (HYG), which usually leads stocks, has completely collapsed.
All of these charts are warning that the market is susceptible to a sharp correction at best and possibly even a meltdown.
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Chief Market Strategist
Phoenix Capital Research