It is always concerning to me when the T2108 Chart starts diverging from the market

For those of you not familiar with the indicator, the T2108 chart measures the percentage of stocks that are trading above their 40-day moving average. Typically in a very healthy market where it is consistently making higher-highs and higher-lows, the T2108 indicator will be in the realm of 75% or more.

So with the S&P 500 hitting new all-time highs day after day (minus the last five trading sessions), one would expect that this indicator would be soaring right?

WRONG!

As of this post, only 43% of stocks are trading above their 40-day moving average. That means stocks are not doing nearly as well as the broader market and a small selection of stocks, big names at that, i.e. Apple (AAPL) and Facebook (FB) are the carrying the water for the rest of this market while everyone one else either treads water or sinks.

So check out the T2108 Chart that I have posted below.

Startling when you consider it against the price action of the S&P 500, the Dow Jones Industrial Average, Nasdaq and Russell right?

With the T2108, you would think we are in the midst of a decent correction in equities

Back in August of last year, we saw a 100+ point correction over a three month period where T2108 went from 80% all the way to 20% before the election saved it. There could be an argument for that here, where we won’t necessarily sell-off hard, but more or less flat line or go just steadily drift lower for the next couple of months.

OR

Go back to late 2014 where price action drifted sideways while the T2108 diverged, until August 2015, when a decent size correction occurred and again in January of 2016 too.

So essentially, don’t sleep on this market, the selling opportunities could arise very soon, and you’ll want to make sure you aren’t asleep at the wheel or worse, find you are lazy in your risk management and not making sure you are preparing for a correction.