While FundStrat’s Tom Lee has not been banned from ESPN, he may well be banished from mainstream business media as not only is he bullish Bitcoin, and the S&P’s most-bearish strategist (target 2,275 year-end), he is now calling for a 5% correction in stocks as market breadth collapses.

“The constellation of evidence is growing supporting such a drawdown,” Lee explained in a note this morning, pointing to the percentage of stocks on the New York Stock Exchange that are trading below their 200-day moving average as a signal that is flashing red warning signs.

“When [this indicator] moves below 50, it is saying fewer stocks are supporting the overall index and our analysis shows, such deterioration historically results in the S&P 500 ultimately falling below its 200-day – this happened 23 of 24 times,” Lee wrote.

That would imply “a move of about a 4%-5% decline in the next month towards 2,300 or so.”

Lee is not alone. While we have been noting the divergences between market internals and headline strength, a cluster of Hindenburg Omens has appeared (notably picking up on divergences between highs and lows and advancers vs decliners) and now WSJ is even raising doubts…

Traders are keeping busy in the late-summer doldrums by parsing the internals of the U.S. stock market.

Their diagnosis: Not great.

the number of S&P 500 stocks marking new 52-week lows has been rising. William Delwiche, an investment strategist at Baird, notes that earlier this month the proportion of stocks at their lows was the highest since early 2016, when the market was under severe pressure over global growth concerns. He’s watching levels for the S&P 500 starting at 2375 – about 2.6% below Thursday’s finish – as a long-term technical supports.

Katie Stockton, a technical strategist at BTIG, notes that the number of S&P 500 stocks breaking down past key technical levels has outnumbered those breaking out by a tally of about 2.5-to-1 over the past three weeks, another sign of flagging market momentum.

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