I have pointed out several times over the past 6 months the divergencies in many S&P companies and sectors.  The economy still does not feel like it is heading into a recession within the next 8 to 12 months, so from a historical perspective, a full blown bear market seems unlikely, but a good pull back, say 15% to 18% may be in the cards. This Baron's article brings it home IMO:

From the article:

"Confirming the A/D line weakness is another technical indicator: individual stocks already in a bear market, that is, down 20% or more from their respective highs. As of Dec. 28, 30% of the stocks in the S&P 500 index were in bear territory. That level has risen steadily: 23%, when the market peaked on Nov. 3, 19% in July, 15% in June, and 12% at the May peak. Each time, the index tried and failed to reach a new high, and the underlying stock participation worsened, she notes. There’s been a mirror-image decrease, too, in the number of stocks within 2% of their 52-week highs.

Big-cap gains are masking poor performance elsewhere. About 37% of stocks in the S&P 400 Midcap index are down 20% or more, as are 46% of those in the S&P 600 Smallcap index. Typically, large caps are the last to roll over during the formation of a major market top, she says."

Full article:

barrons.com/ar...mod=BO

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