Source: Jin10 Data

Except for a few companies that keep pushing forward, the engine driving the increase in this index seems to be smoking. In fact, nearly one-third of the constituent stocks hit new lows in the past month, according to data collected by Bloomberg through last weekend. This number far exceeds the number of stocks that push the index up. In fact, only 3.2% of constituent stocks hit new highs in a month, including 'other' and the strong momentum of Nvidia and Apple, whose market cap just surpassed Other, becoming the world's largest company by market capitalization. 'Sellers are entering the market while bulls are dancing on the edge,' said Andrew Thrasher, technical analyst and portfolio manager at Financial Enhancement Group. 'It doesn't take much effort to crash this market now with Nvidia and Apple controlling it all.'$S&P 500 Index (.SPX.US)$Apart from the large technology companies that hit historic highs, the engine driving the rise in the index appears to be smoking.

Despite the constant record-breaking of the S&P 500 index, the number of participating stocks in this year's upward trend has been decreasing. According to data compiled by Bloomberg Intelligence equity strategist Gillian Wolff, in the past three months, the average increase of the 10 largest stocks in the index (mainly technical giants) with the largest market cap was 17%, while other stocks averaged a 1.3% decline. The gap between large-cap stocks in the S&P 500 index and other stocks is growing.$Apple (AAPL.US)$statistics and indicators show that market breadth is still weak, increasing uncertainty about the sustainability of the US stock market's rise.$NVIDIA (NVDA.US)$For example, the New York Stock Exchange's Advances and Declines Line, a popular indicator that tracks the ratio of rising to falling stocks on a daily basis, closed at a six-week low on Friday.$Microsoft (MSFT.US)$Market breadth is well below last November's peak.

The percentage of S&P 500 index constituent stocks trading above the 50-day moving average is also declining, from 85% at the end of March and 92% in January to 47% on Monday.

At least for now, the rise in the US stock market continues. The S&P 500 index rose 0.3% on Tuesday and has risen 15% so far this year. However, the S&P 500 equal weight index (which does not differentiate by company size) has lagged behind the market cap-weighted version by nearly 11 percentage points this year. If it ends now in 2024, this will be the second-largest gap since the dot-com bubble in 1998, second only to 2023.

A series of indicators shows that market breadth remains weak, which increases uncertainty about the sustainability of the US stock market's rise.

For example, the New York Stock Exchange's Advances and Declines Line, a popular indicator that tracks the ratio of rising to falling stocks on a daily basis, closed at a six-week low on Friday.

In the meantime, the measure of overall US stock positions is hovering near multi-year highs, raising concerns among investors that there is almost no room for stock holding. Deutsche Bank measures the index of discretionary and rule-based investors' stock exposure near its highest level since November 2021.

For now, the upward trend of US stocks continues. The S&P 500 index has risen 15% so far this year, increasing 0.3% on Tuesday. However, the S&P 500 equal weight index (which does not differentiate by company size) has fallen nearly 11 percentage points behind the market cap-weighted version this year. If it ends now in 2024, this will be the second-largest gap since the dot-com bubble in 1998, second only to 2023.

Editor/tolk