One unique feature of the rally in global stocks from the middle of 2013 is the constant deterioration in new highs of individual stocks even as headline indices make new cycle highs. Generally speaking, we like to observe an expanding number of new highs in individual stocks as headline indexes rally because this indicates broad participation. Contracting numbers of new highs in individual stocks give us pause because it is one indication that headline indexes are being led higher on declining breadth, a condition which tends to eventually be negative for stocks unless the divergence is corrected.
In the charts below we show the percent of issues in each MSCI developed market region that are at new 52-week highs on a closing weekly basis (the blue line) overlayed on the price in USD of the respective index (the red line). What we note is a pattern of lower highs in the blue line at every major breakout of the red line in all regions except for the MSCI Pacific, which often times marches to its own drumbeat. So far the MSCI Europe Index seems to be responding to the declining breadth, but the MSCI North America has remained strong. Time will tell if the MSCI North America catches down to the level of new highs or if new highs finally expand on the next major break to higher prices.