Folks, I would like you to think about TECH stocks and how they have affected the recent and robust rally in the stock market the last 2 months. In your asset allocation project, I asked all of you to

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As the S&P 500 index edges back into positive territory for the year, investors should take note of the fact that a handful of stocks appear to be doing much of the heavy lifting.

The market benchmark was up 1.3% in 2020 through Monday’s close, but much of those gains are built on the moves of technology giants like Amazon.com (ticker: AMZN), that have posted big gains amid Covid-19 lockdowns that have dragged on sales at many firms.

“The ‘Big-5’ are dominating things in ways we haven’t seen in decades, and in some cases ever,” Jonathan Krinsky, chief market technician at Bay Crest Partners wrote in a note Monday night. “If and when they begin to falter, then ‘the market’ will have issues, and significant ones at that.”

That trend continued Monday when stocks had quite a day. Well, some of them did.

The tech heavy Nasdaq Composite soared 2.5% to a record close, but only about half of its components were positive for the day. This kind of breadth has drawn comparisons to the technology bubble from the late 1990s and early 2000s. The S&P 500 index rose 0.8% Monday, but about 70% of its components closed down. Such top-heavy action was led by big tech giants like Amazon, which gained $234.87, or 7.9%.

The SPX advance-decline line—a technical analysis indicator that measures all the index’s stocks that are advancing subtracted by those declining each day—was negative 147 on Monday.

That would be the worst ‘breadth’ reading for any day the S&P 500 was up 0.84% or more, wrote Krinsky, citing data that goes back to 1996. If you’re a glass-half-full investor, Monday was the best performance for the index on a day when the figure was negative 147 or worse.

The only other times in his data set when the S&P 500 index closed in the green while the advance-decline line was negative 147 or worse was during the 1998 to 2000 period. “Even then, most days were marginally positive, less than 20bps,” he wrote.

Krinsky points to what he calls “The Breadth Paradox.” “From a purely mathematical standpoint, the more lopsided breadth gets, the less it matters to the index’s performance on the way up,” he wrote.

For the S&P 500, the top five stocks are Apple (AAPL), Microsoft (MSFT), Amazon, Facebook (FB), and Google’s parent Alphabet (GOOGL). They make up 21.77% of the index. The more those five gain in market cap, the more power their moves have over the index’s movements.

To be sure, such a divergence between the index’s moves and the performance of its participants doesn’t mean the market is at its peak. Though all market tops are preceded by such a divergence, not all breadth divergences precede market tops, Krinsky notes.

Still, there is reason to be somewhat concerned—if the Big Five can’t keep things going. Looking at Apple, specifically, it’s about 34% above its 200-day moving average, he notes. Since 2012, it was only previously above the 30% threshold this past January, ahead of its earnings report at the end of the month. There’s a crucial caveat, given a global pandemic didn’t drag on stocks in any other year. But Krinsky believes a lot of good earnings news is already priced into the stock. He sees a similar set up for Microsoft, which reports results on Wednesday.

That doesn’t mean you should bet everything against the market. “There are names below the surface that continue to set-up so we would focus on those while keeping a close eye on everything else,” he wrote.

He pointed to technical setups for Advanced Micro Devices (AMD) Broadcom (AVGO), Skyworks Solutions (SWKS), Xilinx (XLNX), and Glu Mobile (GLUU).

Late Tuesday morning, shares of Apple, Amazon, Microsoft, and Facebook were down. The S&P 500 was up 0.7%. Go figure.

Write to Connor Smith at [email protected]

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