SPXEWI has lost 2.71% over the last 30 days and struggled to participate in the 0.83% gain the SPX has had over the same period. While the absolute performance is quiet, the weak performance of SPXEWI over the last month has led to concerns over a lack of breadth in the market.

Price action on major indices has shown some softness over the last few sessions. The S&P 500 Index (SPX) and the S&P 500 Equal Weight Index (SPXEWI) were down 1.73% and 2.21% over the last seven days, respectively. This isn’t much absolute weakness to worry about, at least when looking back only a few days. However, SPXEWI has lost 2.71% over the last 30 days and struggled to participate in the 0.83% gain the SPX has had over the same period. While the absolute performance is quiet, the weak performance of SPXEWI over the last month has led to concerns over a lack of breadth in the market. When looking at a short-term indicator like the Ten Week For the S&P 500 (^TWSPX), the weakening breadth becomes more apparent as the indicator sits down at 40% on its chart. The indicator has been declining for a few months as the SPX has chugged higher. This highlights an important point: indicators need to be used in conjunction with other tools like trend charts to maximize their usefulness. Nonetheless, if we see breadth continue to decline, it does leave the SPX vulnerable to swift declines, particularly in such a top-heavy market.

While breadth is not ideal, we have yet to see the chart for the S&P 500 show any signs of weakness. SPX trades on four consecutive buy signals and has not reversed down into Os despite a poor week of performance. A few key support areas to watch are 6600 and 6250 which are the two closest support levels. 6600 is also the midpoint of SPX’s ten-week trading band which adds some more significance to the level. One positive from the lack of performance over the last few weeks is that SPX has backed off from the top of its ten-week trading band with a current weekly overbought/oversold reading of 40%. Bringing everything together, breadth in the large cap market is deteriorating down to concerning levels, however, price action for the S&P 500 has yet to show any signs of slowing down. If breadth continues to decline further, it may be prudent take some precautions like trimming positions that have grown larger than ideal or selling calls against some extended positions.