It's no secret that we've been concerned about the lack of new highs in individual stocks since at least the beginning of the year. Indeed, we've made note of the divergence between headline stock indices and the number of stocks making new highs here, here, here andhere and probably in a few other posts as well.
In the charts below we show that a lower and lower percent of stocks have been making new 20, 50, 65, 100, 200 and 252 day highs at nearly each instance of new cycle highs in the MSCI World Index.
At this point one might wonder why this is important or relevant given that the divergence has lasted for the better part of nine months and stock indices keep going up. It would be a fair question and our response is to say that bull markets which display dwindling participation by individual stocks are built on shaky ground and prone to reversal, as was demonstrated in 2011. To be clear, stock indices don't have to decline to wipe away this divergence - a substantial increase in individual stock participation at the next new all-time high would do the trick - but so far we've yet to see that play out.