Cautionary Signs?

As the market hits new highs, technical analysts are seeing danger signs. On Nov. 19 the share of Standard & Poor's 500-stock index companies whose price gains beat the performance of the overall index dropped below 40%. That's a cautionary sign, since it means fewer stocks are taking part in the rally. Just in November, as of the 19th, the S&P 500 had climbed 6%, advancing its year-to-date rise to more than 24%. Typically, in bull markets, about half the stocks in the index outperform. "There has been a higher probability that a stock purchased 20 days ago would have underperformed, not outperformed," explained analysts at New York research firm Concept Capital in a Nov. 19 newsletter. Over the last 180 trading days, food packager MeadWestvaco (MWV) is the only S&P 500 company to beat the index more than 60% of the time. Four companies—Exxon Mobil (XOM), Southern Co. (SO), Quanta Services (PWR), and Robert Half International (RHI)—outperformed less than 40% of the time.