Clearly, the global economic slowdown remains a headwind for U.S. stocks. What’s more, declining earnings and declining revenue continue to pressure U.S. stock valuations. We are now looking at a price-to-sales ratio of 1.84 – one of the highest P/S ratios on record.

The third component that sent stocks tumbling back in August was the softening of market internals. In particular, the discrepancy between the S&P 500’s Advance-Decline (A/D) Line and that of the New York Stock Exchange (NYSE) pointed to fewer and fewer large companies holding up the benchmark. Here in November, the disparity appears to have resurfaced.

 

Some researchers have been particularly outspoken on the lack of market breadth. Heading into the current week of trading, Strategas Research Partners noted that “the 10 largest stocks in the S&P 500 have contributed more than 100% of the year’s roughly 2% gain.” They added that “the 10 biggest stocks  in the index accounted for just 19% of the gains last year and 15.2% of the index’s return in 2013.”

We should let the above data sink in for a moment. In 2013 as well as 2014, the S&P 500’s appreciation was attributable to most of its components. In 2015? Only the 10 biggest large-caps account for the positive spin.

It gets worse. The same canaries in the investment mines that stopped serenading last summer – high yield junk bonds, emerging market stocks, small company stocks, commodities – are straining their vocal chords once again. The iShares iBoxx High Yield Corporate Bond ETF (HYG) appears destined to retest its 52-week lows in the same way that commodities via DBC have.

HYG 50 200

 

In sum, the S&P 500 has never fully recovered because global economic headwinds, equity overvaluation and anemic market breadth remain. Transporters, industrials, energy, materials, retail, leisure, household products, utilities, real estate, media, healthcare – a wide variety of sectors and sub-sectors have been buckling. It follows that it should not be all that surprising to see the S&P 500 buckle as well.

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