The S&P 500 has set record after record in the past month, but the cap and things aren’t looking so good.

The advance-decline (A/D) line, a measure of market breadth, has been falling since late May even as the S&P 500 climbed to new highs, according to a note from LPL Financial Friday.

The A/D line is calculated by subtracting the number of declining stocks in the S&P 500 from the number of advancing stocks and adding the difference to the previous day’s value. A rising A/D line indicates strong width, while a falling A/D line represents narrowing width.

Together, a rising S&P 500 and a falling A/D line, as shown in the chart from LPL Financial below, could be cause for concern on Wall Street. It shows that gains from a handful of large stocks are masking softness among smaller stocks, potentially signaling weakening investor sentiment.

Divergence also increases the risk of market concentration because the largest stocks are increasing their weight in the S&P 500 while the laggards are losing weight. A sharp decline in the stocks of the largest companies in the index will have a large impact on the index as a whole when the breadth is minimal.

That dynamic was on full display Thursday when the S&P 500 fell from an intraday record high as Nvidia ( NVDA ) fell 3.5% — its biggest one-day drop since late May. That’s not a particularly long time, but in that period Nvidia shares rose 22%, increasing its market capitalization from $2.7 trillion to more than $3.3 trillion and increasing its influence over the S&P 500.

The $3 trillion market cap club

To be sure, Nvidia isn’t the only stock that has contributed to the divergence. Other members of the $3 trillion club, Microsoft ( MSFT ) and Apple ( AAPL ), have also risen to all-time highs in recent weeks. They’ve been joined by a slew of smaller megacaps, including Broadcom ( AVGO ), Oracle ( ORCL ), and Adobe ( ADBE ), which have been buoyed by earnings reports that demonstrated strong demand for their artificial intelligence offerings ( AI).

Meanwhile, the rest of the market has weakened. As of Thursday’s close, Information Technology (+10.7%) was the only sector to outperform the S&P 500 (+3.7%) so far this month. The only sectors within 1 percentage point of the broader index were Consumer Discretionary (+3.3%) and Communications Services (+2.7%), sectors dominated by AI giants Amazon ( AMZN ), Alphabet ( GOOGL ) and Meta Platforms (META).

The A/D line divergence mentioned earlier does not, notes LPL Financial’s chief technical strategist Adam Turnquist, mean the bull market is over, “but it does indicate increased risk that the broader market may be caused by a possible pause or withdrawal”.