U.S. Stock Market: Weakness Begetting Weakness?

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As I was putting together my indicator review for the week, I noticed how consistent the recent stock market weakness has been:

• For six consecutive sessions, we have had over 2500 stocks across the NYSE, ASE, and NASDAQ making fresh 20-day lows. The highest number of 20-day highs over that period was 410.
• We have had more stocks making 20-day lows than 20-day highs for 20 consecutive sessions.

I think it's fair to say that a strong stock market is one in which, over time, we see more stocks making fresh 20-day highs than lows. A weak market is one in which the number of stocks making fresh lows outnumbers the number making highs.

Above we see the S&P 500 Index (SPY; blue line) plotted against a cumulative line of new 20-day highs minus lows from 2004 to the present. We can see that the current market strength topped out in July, ahead of the October price peak. We can also see that the market has been weakening since that time: the cumulative line of highs minus lows continues to fall.

One definition of a bear market is one in which lower prices fail to attract buyers, leading to still lower prices. If you peruse the indicator reviews from the past several weeks, that is what we have been seeing.