Despite the ongoing debate about the market’s ability to shake off negative factors such as rising interest rates and crude oil prices, a closer examination of the underlying sectors reveals a different story. In this blog post, we will delve into the performance of various sectors within the S&P 500 and explore why the market’s resilience may be more of an illusion than a sign of strength.

Firstly, let’s take a look at the overall performance of the S&P 500. While it may have only fallen less than 3% from its mid-August highs, a closer inspection reveals that certain sectors within the index are performing poorly. For instance, industrials are down by 9%, equal-weight discretionary is down by 8%, and small-caps are down by 6%. These numbers suggest that the market’s resilience may be more of a mirage than a sign of strength.

Moreover, there has been a lack of follow-through to upside breakouts. In other words, when stocks do manage to break above resistance levels, they often fail to hold onto those gains. This is a clear indication that the market may be experiencing distribution, rather than accumulation. As BTIG notes, “there’s no mo’!”

It’s important to remember that market bottoms typically see most stocks capitulate at the same time, creating an “event.” On the other hand, market tops often see stocks roll over at different times until there is nothing left to support the key indices. Based on this analysis, it’s possible that the current upswing may be nearing its end and a downside break on the S&P 500 could be imminent.