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Market leadership narrows as investors take to sidelines
There is a well-worn phrase that ‘a week is a long time in politics’. In market terms, a week can feel even longer and can sometimes signal a shift from one trend to another.
A fortnight ago when we introduced the idea of watching the number of stocks making new highs as a barometer of the health of the market, the FTSE All-Share was just below its all-time high and everything seemed to be going swimmingly.
We intended to run the feature monthly, but the last few days have seen a marked shift in investor sentiment and a sharp change in the direction of the index which has been reflected in a significant narrowing of market leadership.
According to data from Shore Capital covering the FTSE All-Share and the AIM All-Share, instead of 70 or more stocks making new 12-month highs, the list has shrunk to a fraction of that number.
At the same time, the number of stocks making new lows has ballooned five-fold from less than half a dozen to 25 names, outnumbering the highs by more than two to one.
Unsurprisingly, stocks in a takeover situation such as Audioboom (BOOM:AIM) and Sumo Group (SUMO:AIM) are still enjoying new highs, while waste collection firm Biffa (BIFF) is still riding high along with ‘steady Eddie’ performers like construction firm Galliford Try (GFRD) and utility Pennon Group (PNN), which have been on the new highs list consistently this month.
On the other hand, all the investment trusts which were making new highs a fortnight ago have fallen by the wayside, as have the legal services firms and consumer-facing stocks.
The list of losers is equally revealing as it includes a number of former ‘market darlings’. In the technology sector, there are new lows in Concurrent Technologies (CNC:AIM), FD Technologies (FDP:AIM), formerly known as First Derivatives, Iomart (IOM:AIM), IQE (IQE:AIM) and Wandisco (WAND).
There are new lows in ESG stocks Amte Power (AMTE:AIM), which makes lithium-ion batteries for electric vehicles, Bluefield Solar Income (BSIF) which generates solar and wind energy, and Velocys (VLS:AIM) which produces sustainable fuels.
Consistent with our screening a fortnight ago, there are still plenty of resources and basic materials stocks making new lows, and despite renaming itself defence contractor Avon Protection (AVON) seems unable to counter the downward momentum in its shares.
Finally it’s worth noting the poor performance of a couple of recent issues. Although they are not technically trading at 12-month lows, Moonpig (MOON) and Parsley Box (MEAL:AIM) are at their lowest since floating as ‘lockdown’ plays continue to lag the market.