There Is Something Curious About This Week's Stock Market Drop

What you are looking at is a chart of the internals of the S&P 500.

In this chart, on the bottom, we see the advance/decline line for the S&P 500 and then below that the advance/decline volume line.

The first simply measures up the number of stocks going up minus those going down to create a running total day by day. The second one is like an on balance volume indicator doing that.

What it tells us is that the internals of the market actually held up fairly well on this drop, however the advance/decline volume line has been fading for a month and fell hard this Monday and has barely bounced back up.

What that means is that there has been intense selling in a few stocks in the market and not across the board.

Of course this was the story on the way up, because the S&P 500 is a market weighted index, with the big buying happening in stocks like NVDA and half a dozen other big cap names.

The intense selling has been going on with them, though, not just this Monday, but in the weeks lead up to it too.

We will watch to see if this indicator strengthens over the next few weeks and months, because if it doesn’t it will be a huge warning sign for the market AFTER the next rally.

A theme of a big rotation out of tech was a story into this week and likely will be one that continues over the coming months.