How Weak Is This Market?

I recently noted that it has been rare historically to find over 50% of all listed stocks making new 52-week lows on a given trading day. When we have seen such occasions, such as May, 1970 and October, 1987, it has not been unusual to see multiple such weak days, as very oversold markets beget further selling in the short run. Interestingly, Wednesday qualified as such a weak day on the heels of Monday's historic weakness. On Wednesday, we had over 5200 issues across the NYSE, ASE, and NASDAQ make fresh 20-day lows and over 4000 make new 52-week lows. Over half of NYSE stocks made new annual lows on Wednesday, following in Monday's footsteps.

Statistics covered by Decision Point further reveal the historic extent of market weakness. Only 3% of stocks in the S&P 500 Index and 4% of NYSE issues are now trading above their 200-day EMA--a lower level than seen during the 2001-2003 bear market, and the lowest level since the panic decline of 1987. Among common stocks only in the NYSE universe, 1 made a 52-week high; 1048 made new lows, a new record for this bear market.

Bottoms are made when selling becomes exhausted and long-term participants perceive value and lift stocks sharply off their lows. That exhaustion can occur over a period of months, as fewer stocks and sectors make new lows over time and individual stocks and sectors find fresh buying interest. Thus far, we're not seeing such selling exhaustion; weakness has, so far, begotten further weakness. While it is tempting to call market bottoms and pick up bargains, all we can say Wednesday is that a historically weak market just got weaker.
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