* * *
Equities fell this week. Worldwide, equities lost just 0.4%, as did emerging markets. Europe lost 2%.
In the US, SPX and small caps lost 1.2%. Leadership has moved to small cap stocks: the RUT made a new 2016 high this week.
For the second week in a row, NDX was the laggard: it lost 1.5% last week and another 3% this week.
What accounts for the disparity between the greater weakness in NDX and the other indices? Primarily, the price of oil. Crude gained another 5% this week and helped offset weakness in SPX and RUT. NDX has zero exposure to energy.
Safe havens - treasuries and gold - were higher: treasuries gained 0.8% and gold gained 5%.
Why did equities fall this week? It's an important question because the cause of weakness says much about what happens next.
Deteriorating breadth was not the cause. Below the surface, breadth has been strong.
The NYSE advance/decline line - the cumulative total of the daily difference between advancing issues and declining issues on the NYSE - reached a new all-time high on Wednesday. This means that participation in the rally continues to be widespread. Recall that the advance/decline line has declined before the SPX has made its final high at every cyclical top in the past 50 years. Further gains should still be ahead (post here).
The average stock in the SPX has been rising faster than the size-weighted index (lower panel). This is another way of saying that participation has been strong. It's not a perfect predictor, but very often the average stock will underperform the size-weighted index before a correction of greater than 5% (arrows). That hasn't happened.