Ever heard an analyst talk about "market breadth" and wondered what the heck they're talking about? Or seen a market rise described as "narrow"? US action last night illustrated the point exactly. The US 30 rose, the SPX500 was flat and the NDAQ 100 and US Small Cap 2000 fell. Investors focussed narrowly on the high market value, "blue chip" stocks. This can be interpreted as a sign of investor caution, and is why some see narrow rises as low quality.

The reverse is also true. When broad indices with a large number of stocks outperform their blue chip peers its often considered a sign of increasing investor confidence.

Now look at the chart above. Over the period April to August the US Small Cap 2000 beat the US 30 by around 7.5%, an indication of growing confidence among US investors. However in just one month over September that outperformance has more than reversed, with an 8% relative fall from the US Small Cap 2000. This could mean US investor confidence is crumbling, and suggests a larger market sell-off could be on the way.