S&P 500: Get Ready for an October Surprise?

MKM Partner’s Jonathan Krinsky worries about the stock market heading into October:

ZUMAPRESS.com

Something unusual happened on Friday, and it wasn’t just that one of the largest IPO’s in history came public. The Russell 3000 Index (RAY – 1194.98) hit a new 52 week intra-day high, yet less than 55% of all Russell 3k stocks closed above their 200 DMA. The last time that happened was March 24th, 2000. That day of course was the all-time high for not just the Russell 3k, but the S&P 500 as well. As we enter the back half of September we think there has been enough deterioration in the internals, combined with seasonal headwinds, that the risk/reward for equities now favors the downside over the next few weeks. To be clear, we are not making a call for “The” top, nor are we suggesting that the highs are even in for the year. What we are saying is there are now enough warning signs to suggest at least a modest pullback or consolidation is likely over the coming weeks.

Gluskin Sheff’s David Rosenberg is also concerned worries about the fact that only the big stocks are rallying:

With each passing peak in the major averages, fewer stocks are trading above their 200-day moving averages. The new 52-week high list is actually in a downtrend and hitting lower levels with every new price peak in the major headline indices. New highs are increasingly limited to the largest of the big cap names–the “privates” are inn retreat even as the “generals” forge ahead.

In other words, the body of the Ferrari looks shiny, but the engine is starting to stall.

Was this market ever a shiny sports car to begin with?