The market’s showing serious signs of strain today as the Dow Jones Industrial Average heads toward its ninth consecutive daily decline – a losing streak not seen since February 1978. The blue-chip index has plunged below 43,500, threatening to break below its critical 50-day moving average for the first time since early November.
This isn’t your typical market pullback. While the Dow bleeds out, we’re seeing a bizarre divergence play out across Wall Street. The tech-heavy Nasdaq just notched another record high yesterday, carried higher by mega-cap tech stocks even as the broader market deteriorates.
The real story lies in the market’s internals, which paint an increasingly concerning picture. The S&P 500’s breadth has been abysmal, with most stocks closing lower for 11 straight sessions – the longest such streak in available market data going back to 1999. Only about 30% of S&P stocks managed to climb higher today, potentially extending this historic streak of weakness to 12 days.
Making matters worse, a mere 40% of S&P 500 stocks are currently trading above their 50-day moving averages – the lowest reading since May. This suggests the market’s rally is being propped up by an increasingly narrow group of stocks while the majority of companies struggle.
UnitedHealth Group has been a particularly heavy drag on the Dow, cratering nearly 22% in December alone. This collapse has single-handedly stripped over 800 points from the index this month.
The timing couldn’t be more critical. The Federal Reserve meets tomorrow for its final policy decision of 2024. While a rate cut appears likely, the real focus will be on Chair Powell’s commentary about the path forward. The market’s clearly on edge, with Treasury yields bouncing around as investors position themselves ahead of the announcement.
This morning’s retail sales data exceeded expectations, showing the economy still has some fight left. But that strength could actually work against the market if it causes the Fed to take a more hawkish stance on future rate cuts.
The technical damage is mounting. With market breadth historically weak, the Dow breaking down, and uncertainty around the Fed’s next move, we could be witnessing the early stages of a significant market shift. While mega-cap tech stocks have managed to paper over the cracks so far, history suggests this type of divergence rarely ends well.
Traders should keep a close eye on tomorrow’s Fed announcement. A hawkish surprise could accelerate the current breakdown, especially with market internals already flashing warning signs. The coming days could determine whether this is just another brief setback or the start of something more serious.
