the land mines for the markets are becoming more numerous seasonal weakness is combining with continuing uncertainty over the impact of the delta variant on consumer behavior high labor and material costs affecting pricing and delivery of goods and poor data out of china while the sp 500 is still about 1 from its highs those land mines are taking their toll on large sectors of the market for the last several months most stocks have declined more frequently than they have advancedevidence of a weakening market condition cfras sam stovall said in a recent note to clients other strategists have noticed this divergence as well as the equity market reaches new highs the divergence in the advancedecline line suggests we may be approaching a top guggenheims scott minerd said in a recent tweet in the past such divergence has indicated the market is vulnerable to a selloff the 20 decline club is getting larger about 15 of the bigcap sp 500 are more than 20 below 52week highs but much larger swaths of the midcap and small cap universe are down 20 or more those groups are less techfocused and more susceptible to an economic slowdown slow motion deterioration percentage that are 20 or more below 52wk highs the covidrelated weakness is affecting sectors associated with the reopening such as industrials and retail this phase of the pandemic poses downside risks to the economic recovery including to inflation components that are more sensitive to the disruption in services demand blerina uruci from barclays wrote in a recent note to clients the china slowdown particularly the decline in retail sales due to covid issues is dramatically affecting luxury retailers many of which are based in europe supply chain and labor problems are affecting the ability of some homebuilders to fully deliver on orders concerns about controls on drug prices from the biden administration has also affected big pharma in the past couple weeks most strategists including dubravko lakosbujas from jpmorgan remain bullish but even lakosbujas admits that it is very difficult to read the economic tea leaves given the unique nature and impact of the pandemic the current cycle is more difficult to analyze compared to historical cycles he said in a recent note to clients this cycle is essentially an overlay of two intertwined cycles a covid cycle and a regular business cycle incl labor capex inventory why do so many analysts and strategists remain bullish its all based on the theory that the delta variant will prove to be a diminishing force and that earnings will not materially decline as the delta variant eases we expect these concerns to fade leading to a much stronger 4q21 holiday season unlike last years holiday season disappointment and a pickup in crossborder activity from still depressed levels lakosbujas said