S&P 500 Breadth Divergence Flashes Rare Top Signal, NDR Warns

Ned Davis Research warned that the U.S. equity rally may be nearing its peak, citing a rare divergence between record-high index levels and sharply deteriorating market breadth. With the S&P 500 less than 2% below its August record, fewer than 25% of its components traded above their 50-day moving averages over the past week, and under 45% held above their 200-day averages. Chief U.S. strategist Ed Clissold and senior analyst Thanh Nguyen called it the worst breadth reading ever recorded with the index this close to a high. NDR found only six prior instances since 1980 when the index sat within 3% of a peak while fewer than 35% of stocks topped their 50-day line and under 50% cleared the 200-day line, including September 2014 and November 2021, both preceding market tops. NDR said the S&P 500 typically faces a downward bias over the following month and peaks roughly five months later. HSBC strategists also flagged weakening breadth amid surging bond yields.