Before I get to the new Bear-o-meter reading, I thought I’d post an interesting chart created by Jason Castelli, Technical Analyst with Raymond James. For the record, Jason notes that he didn’t re-capitalize the index (a feat that would be cumbersome, and likely inaccurate even if attempted). As Jason notes:
While the chart is not a perfect representation (based on price rather than market cap weighted) it does speak to how the breadth of the rally has been narrowing, which is something I highlighted in prior emails. The S&P 500 price level less AMZN in the top panel looks considerably different that the actual S&P 500 in the lower. This chart is for illustration purposes as it places a heavier importance on AMZN than actually exists in the broader market.
I post this chart because it ties into some of the observations I made when running through the Bear-o-meter compilation. Market breadth, or participation, is one of those factors. I’ll be visiting the subject of breath below. Jason’s re-worked SPX chart shows us that broad participation in this rally looks weak if you remove AMZN, even if the chart isn’t entirely accurate.
As a refresher (you don’t need to read this if you follow this blog regularly):