August Weakness Producing More Noise Amid Rising Downside Risks For Stock Market

Key Takeaway: As the market has moved from strength to weakness (14 days and counting of more new lows than new highs) over the course of August the noise level has also started to rise.

More Context: The S&P 500 was followed its 1.1% gain on Wednesday with a 1.3% loss on Thursday. These were the first back-to-back 1% moves in the index since March. Don't forget, the investor experience is improved when big moves in both directions can be reduced. Volatility isn't an entry ticket to be paid, it's a tax to be avoided.

This comes as evidence of market weakness continues to mount. New highs are persistently exceeding new lows and the number of sectors above their 200-day averages has been cut in half since the beginning of the month.

Quiet strength being replaced with noisy weakness suggests that the volatility being seen this month is not just "normal" seasonal consolidation after a strong start to the year. Rather it suggests that early year gains may have been built on a shaky foundation and is evidence of a market environment that favors a focus on managing risk over pursuing opportunity.