Gavekal Capital: US Stocks Make New Weekly Highs, but Breadth (Again) Fails to Confirm

Monday, November 11, 2013

US Stocks Make New Weekly Highs, but Breadth (Again) Fails to Confirm

Stocks in the US made a new weekly closing high last week, but some breadth measures failed again to confirm the strength. We typically like to see the percent of stocks making new cyclical highs confirm new cyclical highs in headline indices. We also like to see the number of advancing stocks expand along with headline indices. As the below charts demonstrate, we are seeing divergences between our breadth measures and stock index performance of the sort we saw in 2011.

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
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