Narrowing leadership ends before the index notices

An index can keep rising while fewer and fewer of its members do the work. That narrowing is easy to ignore while the headline level holds, and it usually ends the advance before the headline shows any strain at all.

How narrow advances fail

When a handful of large names carry an index, the index inherits their risk. It does not need bad news across the market to fall, only a stumble in the few names holding it up. Everything underneath has already stopped helping.

The level looks healthy right up until the moment the leaders pause, and then it falls faster than breadth alone would suggest.

What I'm watching

• The share of members above their own long-term trend
• New highs against new lows during the advance
• The weight of the largest names against their contribution to recent gains

Where I stand

Short, on leadership that has narrowed further than the level admits. It is a view about fragility, not about the leaders being bad companies.

What would change my mind

Participation broadening while the index holds. A rally that recruits more members is repairing itself, and the fragility argument stops applying.