QQQ's breadth is weakening

Key points:

• Intermediate-term participation in the Nasdaq 100 weakened this week.
• In similar historical situations, the record improved at intermediate horizons.
• We look at what long-term breadth has meant for the market in situations like this one.

Internals in the Nasdaq 100 are getting worse

That is not a particularly fresh argument. Over the past few weeks, more and more members have slipped below their intermediate trend lines while QQQ itself has stayed not far from its recent high. For investors worried that the index is being held up by a handful of mega-cap technology stocks, that seems to add more evidence.

Breadth deterioration on its own, though, does not tell us much. Markets in ordinary corrections produce similar readings, and what matters is the long-term backdrop against which the weakness arrives. On September 9, QQQ closed a little more than 4% below its highest close of the past 252 sessions, the share of members above their 50-day averages slipped under 40%, and the McClellan Summation Index fell below -200. About 58% of Nasdaq 100 members remained above their 200-day averages.