LIVE MARKETS-The Nasdaq looks fine but its internals tell a different story

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THE NASDAQ LOOKS FINE BUT ITS INTERNALS TELL A DIFFERENT STORY

The Nasdaq Composite .IXIC slipped again on Tuesday, leaving the tech-heavy index down 4.3% from its October 6 record close and 4.7% below its all-time intraday high reached the same day.

What's notable is that the pullback in the index itself remains relatively modest, even as measures of market internals continue to deteriorate sharply.

One example is the Nasdaq New High/New Low (NH/NL) Index, which tracks the balance between stocks making new 52-week highs and lows. It ended Tuesday at 13.1%, its weakest reading since April 16, 2025. The measure ultimately bottomed at 7.8% on April 10, just two trading days after what proved to be the Nasdaq's closing low of the 2024-2025 bear market.

Another breadth gauge traders are watching is the Ratio-Adjusted McClellan Summation Index (RASI). The indicator serves as a long-term health check on the market by measuring and adding up the daily balance between advancing and declining stocks, while adjusting for changes in the number of listed issues over time.

The RASI was already flashing a warning earlier this year, diverging into the Nasdaq's June peak. More recently, it failed to confirm the Composite's October record high.

On Tuesday, the measure ended at -1,265.9, its lowest reading since April 22, 2025. Its April 11, 2025, trough of -1,423.9 came just three trading days after the Nasdaq's April 8 bear-market closing low.

That's what makes the current divergence noteworthy. Both the NH/NL Index and the RASI are nearing levels seen around the Nasdaq's spring 2025 bear-market bottom, even as the index remains less than 5% below its record close.

The divergence remains unresolved. Either the market's leadership stocks continue to weaken, dragging the broader index lower, or participation improves and breadth catches up. Traders may not have to wait much longer to find out which side gives way.

(Terence Gabriel)

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