1,976 stocks are red this afternoon, but the S&P is green

The market is up this afternoon, but most stocks are not.

That sentence does not seem like it should be true, but here are the numbers as of mid-afternoon. 

On the New York Stock Exchange, 785 stocks are trading higher and 1,976 are trading lower, which means roughly two and a half stocks are red for every one that is green. The S&P 500 is up about half a percent anyway.

You see strength in that tape?

Here is what is actually happening. A handful of large tech stocks are pulling the indexes up while the rest of the market bleeds, with chips and memory stocks doing all the lifting. 

If you own anything outside of those names, your account is probably not feeling like it is having an up day, and the headlines are lying to you.

This is what most retail investors miss when they look at the market. 

They see the S&P green and assume the market is healthy, but the number that actually matters is how many stocks are going up versus how many are going down, not the index price itself. That ratio is called the advance-decline line, and right now it is ugly.

Yesterday's session was decisively negative on the A/D, and today is barely positive on a half-percent index gain. 

That is not what a healthy market looks like. 

A healthy market has indexes up because most stocks are up; a narrow market has indexes up because three or four stocks are doing all the work, which is what we are in right now.

Here is why this matters. When a market gets this narrow, either the rest of the stocks catch up to the leaders over weeks of patient buying, or the leaders fall back to the rest of the market in a single ugly day when one of them cracks. 

semiconductors at all-time highs holding up an entire market is not a setup that resolves to the upside.

This is exactly the kind of thing the headlines are not going to tell you. The financial press will keep printing "stocks rally" and "S&P closes higher" while the actual breadth of the market gets worse. 

Your portfolio will tell you the truth before the headlines do.

Given the geopolitical risk and the complacency in the market, I’m going to continue to focus on short-term trades. 

Things like my earnings flips, that went 4-for-4 last week, which I will start trading again tomorrow. 

And some intraday setups using 0dte options. 

Don’t be fooled out there. And make sure to keep your helmets on. 

To your success,

Don Kaufman