The stock market has created some weird and unusual phenomena not seen in years, even decades.

Those phenomena have been building for weeks, which is why I said in various September Profit Radar Reports that risk is starting to outweigh reward.

The discrepancy between the Dow Jones Industrial Average

DJIA, -3.15%

 (large-cap) and Russell 2000

RUT, -2.86%

 (small-cap) or Nasdaq

COMP, -4.08%

 were obvious, but there are more hidden, and likely more meaningful, phenomena. Here is a look at three of them:

New NYSE lows

Last week (on Oct. 4), the S&P 500 closed 0.99% below its all-time high. On the same day, 13.7% of all stocks traded on the NYSE fell to 52-week lows.

The chart below shows just how unusual this is. A spike of 52-week lows (especially more than 10% of all stocks traded) is usually seen near stock market lows (gray line), not highs.

The last time something remotely similar happened was on July 27, 2015, when the S&P 500 closed 2.9% below its all-time high, and NYSE lows spiked to 14.9%.

This was followed by two 10%-plus corrections.




Alternate volatility

There are many ways to measure volatility. The most popular gauge is the Volatility Index

VIX, +3.70%

and another way is to measure actual daily percentage swings.

A couple of weeks ago, the maximum daily S&P 500 move (averaged out over the 30 days) was only 0.54%.

Perhaps more astounding is that, prior to Wednesday, the S&P 500 has not moved more than 1% (from close to close) since June 25 (73 trading days).

Last Friday’s 0.87% loss was the first time the S&P 500 moved more than even 0.80% since July 25 (51 trading days).

The last time the S&P 500 has gone more than 51 days without a 0.80% move was in 1968. Over the next 18 months it lost 34%.

A 37-day streak of no more than 0.80% moves ended in October 2014, which was followed by a number of corrections, the worst one being around 7%.

Liquidity fatigue

One of my two favorite liquidity gauges did not confirm the latest (Sept. 20) S&P 500 or Oct. 3 Dow Jones Industrial Average closing high.




This is called a negative divergence. Such divergences can be erased, but in the current case, I would like to see the divergence mature further in the form of another new S&P 500 high unconfirmed by liquidity.

Conclusion

The phenomena discussed above seem to indicate the beginning of the end, not the end. Market tops are a process, not an event. Downside risk is increasing, but the process allows for new (likely temporary) highs.

The upside target for potentially new highs and the (probably surprising) downside target for the next bear market is discussed here.

Simon Maierhofer is the founder of iSPYETF and publisher of the Profit Radar Report. He has appeared on CNBC and Fox News, and has been published in the Wall Street Journal, Barron’s, Forbes, Investors Business Daily and USA Today.

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