So far this week, we’ve looked at overbought conditions, bond yields and their relationship to stocks, and market psychology. Today, let’s check in with some breadth measures to see what they’re telling us about the Nasdaq 100.

McClellan Volume Summation Index

The McClellan Volume Summation Index is a cumulative breadth indicator derived from advancing versus declining volume. It’s used to gauge the underlying strength or weakness of market participation. When the MSI is rising, it typically confirms healthy index uptrends, while divergences or persistent declines can warn that an index rally is losing internal momentum. CNN’s useful Fear & Greed model includes this indicator, which is updated daily. Since the middle of April, it has shown a pronounced bearish divergence from the rally in US stock indices.

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Nasdaq New 52-week Lows

There has been a modest, but persistent uptick in the number of stocks making new 52-week lows on the Nasdaq. Rising New Lows are characteristic of index weakness, as illustrated by the yellow highlighted boxes in the chart below. So, this isn’t what we want to see when the index is rallying.

Deteriorating Drawdowns Among Nasdaq 100 Names

Tom McClellan is a market analyst whose parents devised the McClellan Summation Index referenced above. He’s an excellent commentator - if you don’t follow him on X, you can find him @McClellanOsc. This week Tom drew attention to the fact that the average 52-week drawdown among Nasdaq 100 stocks is deteriorating even as the Nasdaq 100 index powers on. That isn’t a great look.

Nasdaq 100 Advance/Decline Line

The Nasdaq 100 Advance/Decline Line is a cumulative market breadth indicator that tracks the net number of advancing versus declining stocks within the Nasdaq 100, helping assess whether gains in the index are being broadly supported. A rising A/D line confirms healthy participation and trend strength, while divergences can signal narrowing leadership and potential trend exhaustion. As you can see from the chart below, since mid-April, the Nasdaq 100 has been pushing on to new highs, but this has not been confirmed by its Advance/Decline Line, which has been going sideways for a month.

Putting it Together

Whichever way you slice it, breadth isn’t great at the moment. Gains this year have been concentrated among a small number of groups and stocks, most notably semiconductors and the beneficiaries of the AI capex boom. This can resolve in two ways. The bearish take is that the leaders will catch down to the laggards. However, there’s a bullish take too, which is that the laggards catch up and the rally broadens to sectors that have been left behind. We hope to see a resolution to the conflict in Iran soon – if that happens, then it could spark a bullish rotation to sectors that have been struggling against high energy prices and rising yields, such as transports, small caps, homebuilders, utilities, and biotech.

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