PremiumStock Market Breadth Is Closing In On Capitulation Levels
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Authored by Simon White, Bloomberg macro strategist,
Breadth measures of stocks on Friday are close to some previous market bottoms, suggesting we are near to at least an interim base in prices. However, if sentiment has been weakened too far, we may be past the point of no return where a recession is induced, leading to further price declines.
We are seeing a bounce now, but the stock-market decline became more indiscriminate on Friday as breadth showed a notable deterioration. A net 475 stocks on the S&P fell, close to the 492 stock that fell around the October 2022 bottom. Just over 45% of S&P stocks now have an RSI of less than 30, as high as it got in 2022, although other bottoms in December 2018 and March 2020 saw this reach more than 70%.