Invest1 publisher3 min readPublished
Crescat counts 17 sessions of more new lows than new highs under a record NASDAQ close
The letter reads four breadth and credit divergences as a major market top forming. The most recent episode it cites, the weeks before April 2, 2025, was followed by a selloff the index has since recovered.
The Investor · Invest desk
What happened
- The NASDAQ Composite closed at a marginal new all-time high while its component stocks hitting new 52-week lows outnumbered those hitting new highs for 17 trading days in a row.
- Over the same six months in which the S&P 500 was setting new all-time highs, US triple-C credit spreads widened significantly against triple-B, according to the letter.
- The rolling 50-day correlation between the S&P 500 and its cumulative advance-decline line weakened through 2026 and turned negative, which the letter says last happened at the peak of the Dotcom bubble.
- The share of S&P 500 members trading above their 200-day moving averages plunged over the past month while the index itself stayed relatively flat near record levels.
- The letter closes by naming gold as the opportunity, and specifically Crescat's diversified activist precious and critical metals exploration strategy, measured against the S&P 500.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- contradiction The same indicator family that the letter reads as a major top also flagged April 2025, a decline the index has since recovered from, so an allocator using it cannot separate a top from a drawdown.
- decision Anyone acting on weak internals has to choose a trigger, because the letter credits the timing of the 2025 decline to a tariff announcement, not to the breadth data itself.
- exposure The recommended hedge puts capital into junior mining exploration equities, which the letter itself calls significantly volatile operationally, so the position can lose on company risk while the market call is right.
- constraint Without published spread levels or a breadth percentage, a reader cannot size the signal or test it independently, and has to take the charts as drawn.
In a capitalization-weighted index, the price changes of the largest members move the index most [8]. So the cumulative advance-decline line can fall while the index rises, and both numbers are accurate at once. The letter, published on Seeking Alpha, says earlier letters had already put US stock market valuations at all-time highs across a variety of dimensions [14]; this one is about the composition of the return. "A narrow group of large stocks has driven the overall index return to new highs without confirmation from its underlying components," the letter said [2].
Three and a half trading weeks of more new lows than new highs is the one count the letter attaches a number to [16]. Spread levels for triple-C against triple-B, and the percentage of S&P 500 members above their 200-day averages, appear in charts without stated figures [15].
The credit chart is annotated with four prior episodes: a divergence at the 2000 tech bubble top, levels consistent with the beginning of the 2008 financial crisis and the 2020 Covid recession, and deterioration consistent with the 2022 bear market [5]. Credit markets, the argument runs, pick up deteriorating corporate cash flows faster than equity markets do [4]. The breadth chart adds a fifth episode, the weeks before Liberation Day on April 2, 2025 [9].
That fifth one cuts against the thesis. The letter is written in 2026 [6] and says the S&P 500 has been hitting new all-time highs over the past six months [3]. Those highs postdate the April 2025 selloff [17]. Of the five episodes named, four preceded major declines and the fifth preceded a drawdown the index has since made back [17]. The timing, on this account, came from outside the data: "The tariff announcement was the spark that lit the fire" [10].
The expression of the view sits at the volatile end. "Junior mining exploration carries significant operational and market volatility, but we believe it offers substantially better value and long-term growth potential than gold itself," the letter said [12], and it is where the author's precious metals hedge funds are focused [13].
I would take the description and leave the date. Breadth divergence tells you a return is concentrated; it does not tell you when the concentration breaks, and the letter's own most recent case is a market that fell on a policy announcement and then recovered [9][17]. Two outcomes would separate the readings. If new lows keep outnumbering new highs and the index turns down with no external event attached, the internals were sufficient on their own; if the share of members above their 200-day averages climbs back while the index stays flat [7], the divergence resolved without a top. In the meantime, the hedge on offer is junior exploration equity, bought against an S&P 500 benchmark [11].
What to watch
- Whether the widening of triple-C spreads against triple-B shows up in actual corporate defaults, or stays a relative-value move in the weakest tier.
- Whether the percentage of S&P 500 members above their 200-day averages recovers while the index holds near its highs.
- How the junior mining exploration position performs against gold itself, since the letter claims better value and growth than the metal.