Stocks Show Weak Internal Strength Despite S&P 500’s Proximity to Record Highs
The S&P 500 index is currently trading near its all-time highs, yet a significant portion of its constituent companies are performing below their 200-day moving averages, according to data shared by analyst Scott Melker on X. This contrasts sharply with the cryptocurrency market, where 88 of the top 100 digital assets are trading above their respective moving averages. Melker suggests that this divergence indicates a healthier technical position for cryptocurrencies, even as many major tokens remain considerably below their previous peak valuations.
Market Breadth Divergence: Stocks Lagging, Crypto Leading
As of Wednesday, 257 stocks within the S&P 500 were trading below their 200-day moving averages, meaning approximately 49% of the index’s components were above this widely monitored trend indicator. Melker characterized the internal condition of the stock market as bearish, despite the index’s close proximity to record levels.
In contrast, the cryptocurrency landscape presented a different picture. Bitcoin and Ethereum were among the 88 top-100 cryptocurrencies that had surpassed their 200-day simple moving averages. Furthermore, most of these digital assets were also holding their ground above their 50-day and 100-day averages. Melker described this combined scenario as a “clean, bullish configuration across the board.” He also highlighted the significant distance between current cryptocurrency prices and their previous all-time highs, contrasting this with equities, which he believes have already priced in substantial positive news.
“Weak breadth in stocks near highs has historically been a yellow flag,” the market observer noted. “Strong breadth in crypto while prices remain far from peaks is the opposite setup.”
It is important to note that these figures measure the number of assets trading above a long-term average, rather than the magnitude of price increases or the sustainability of those gains. Consequently, they offer a snapshot of market participation but do not guarantee the continuation of current market trends.
Bitcoin’s Recent Volatility and Shifting Correlations
Bitcoin’s recent price action provides further context for this comparison. The cryptocurrency experienced a rebound from approximately $75,000 following setbacks, including the failed CLARITY Act vote and the Federal Reserve’s interest rate hike in July 2023. It briefly surpassed $87,000 before encountering renewed selling pressure.
At the time of reporting, CoinGecko data indicated Bitcoin trading around $84,000, representing a nearly 3% decrease over the past 24 hours but a roughly 10% increase over the last seven days. Ethereum was trading near $2,700, also down close to 3% in a day, but up by 10% over the week.
XRP saw a 6.5% drop in 24 hours, second only to Dogecoin’s nearly 7% plunge in the same period. Zcash also experienced a significant decline, shedding over 6% of its value. These price dips contributed to a broader crypto market capitalization of approximately $2.96 trillion, nearly 3% lower than the previous day, with Bitcoin dominance standing at just over 57%.
Meanwhile, Santiment data reveals that Bitcoin’s correlations with stocks, gold, and the U.S. dollar have weakened. This shift complicates any assumption that the cryptocurrency market will simply mirror the movements of equities.
