* Advance-Decline Weakness - The above three charts from the excellent Decision Point site show how we are testing bear market lows in the advance-decline lines specific to S&P 500 stocks (top chart), NASDAQ 100 stocks (middle chart), and Dow 30 Industrials (bottom chart). The themes of weakness noted recently continued through week's end.
* Sector Deterioration - My recent review of sector strength and weakness found strength confined to a very limited portion of the S&P 500 universe. In the last two weeks, the percentage of Consumer Discretionary stocks trading above their 50-day moving averages has plunged from over 70% to 30%. The corresponding percentage for Financial stocks has dropped from 65% to 28%. Meanwhile, we're still seeing 59% of Consumer Staples stocks trading above their 50-day averages, as money flows continue to reflect defensiveness and fears of recession.
* New Flight to Safety? - I've been watching the tax-free bond funds of late, largely because I committed a chunk of long-term portfolio money toward those. Interestingly, when we had stock market selloffs in August and March, there were selloffs among tax-free bonds, reflecting fears of default. During the recent stock market weakness, however, a number of tax-free funds have been making six-week price highs. We're also seeing some strength carry through to investment-grade corporates. Even as we price in recession, we may be discounting the probability of Armageddon.
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