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What I find interesting over the last several weeks, but even more so in the last few sessions, is the volatility of the "internal" measures of the market's health. Specifically, the breadth figures, which many have pointed out reached extremes not seen since October 1987. The extraordinary swings - negative 2,923 on 5/7, then +2000 yesterday, and now back down to negative 1600 as I write, is interesting for a number of reasons. Take a look at the long term daily breadth chart: for much of the 1990s it ranged between +1000 and -1000. Then starting in January 2000 and lasting until about May 2001, advance/decline having huge up and down moves outside of that +1000/-1000 range.

I'm not suggesting that the advance decline index is telling us the bear market has resumed. Indeed, these wide swings have really only been going on for the last few weeks. But the fact that we are starting to see very large swings in breadth suggests that a process of distribution might be getting started (the bad breadth days) and that the fervent speculation that led to that distribution process does not want to go down without a fight (the great breadth days that follow).

I am guessing here, admittedly, but a repeated process whereby many, many stocks get sold hard followed by some days of very aggressive buying that results in net price declines is not a very healthy thing for stocks. Let's keep an eye on breadth volatility; it might be suggesting something important is afoot beneath the radar of actual prices.
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