Stocks at Risk if Key Levels Break

Mark Newton Flags Weak Market Breadth as Stocks Stay Under Pressure

U.S. equities remained on the defensive early Friday after Thursday delivered the market’s worst drop in more than a month. The Nasdaq Composite slid 2.3%, and tech stocks look poised to drag the market lower again as concerns over stretched valuations and a slower-than-hoped pace of Fed rate cuts unsettle investors.

When fundamentals lose traction, technical signals tend to matter more. Citi strategists note that their “When Generals Fail” indicator still points to a constructive long-term trend for mega-cap tech. Among the so-called Mag 7, only Meta is currently below its 200-day moving average — a sign the broader outlook remains intact.

But Mark Newton, Fundstrat’s head of technical strategy, is not as relaxed. He’s focused on market breadth — the share of stocks rising along with the indexes — which has started to weaken. Newton points out that the percentage of Russell 3000 stocks sitting within 20% of their 12-month highs has begun to roll over, much as it did late last year and ahead of the 2022 market peak.

At around 50%, he says this measure needs to firm up and hold through year-end. Continued deterioration would be “problematic for equities.”

“Markets usually show internal weakness before corrective periods,” Newton cautions. “This time looks no different.”

A potential catalyst that could reverse the tide: Nvidia. The AI bellwether, which closed Thursday at $186.86, reports earnings on Nov. 19. Strong numbers and upbeat guidance could provide a broader boost. Newton adds that he wouldn’t turn bearish on the stock unless it breaks below $178.91, last Friday’s low.

He also highlights key levels that must hold:

• S&P 500: 6,631
• QQQ: 599

A break below these early-November lows would open the door to increased volatility before markets stabilize.

Newton still expects a December bounce, though he’s less convinced that new highs will come immediately. Still, his broader tone remains constructive: while market breadth is a current challenge, subdued sentiment makes a compelling case for buying dips during a seasonally strong period.