Evaporation of New Highs, Expansion of New Lows

August selling pressure exposes market's vulnerabilities

Key Takeaway: Nearly half of the Developed Markets in the ACWI made new 13-week lows last week. The absence of new highs and expansion in new lows is theme that shows up again and again in this week's Relative Strength Rankings.

More Context: Emerging Markets have not been immune to selling pressure in August, but it is among Developed Markets that the expansion in new lows is most acute and the breakdown in trends most pronounced. Taken altogether, last week saw the percentage of global markets at new 13-week lows rising to its highest level since March and the percentage of markets above their 200-day averages dropping to the lowest level of the year. 

While no global markets made new 52-week lows last week, the same cannot be said among US small-cap & mid-cap sectors and industry group. At the other extreme, among the various areas that we track, the only new highs last week (13-week or 52-week) were a couple of cash-equivalent ETFs (MINT and GSY).

The failure of the new high list to expand (on either a global and US-basis) during periods of strength earlier this year leaves the market more vulnerable now that selling pressure has emerged.