It sprays out at the elbow where the horizontal pipe hooks into the vertical. It’s just a tiny stream but a steady stream when the shower is on.

I’m watching Youtube videos. I have a leaking shower arm and I cut away the drywall to expose where the arm goes into the pipe. I can see water spurt out from the joint.  It’s been leaking awhile. I was sure the drywall behind the tile could use replacing, which meant replacing the tile also. It felt sturdy but I thought it had gotten wet for a few months. I stuck my cell phone camera in the hole I cut in the drywall and took a pic. Yay – it looks like zero water damage in there! I know it spurted (just a little squirt but it’s steady when the shower is on) for awhile before it made a wet spot in the drywall that I cut away to see inside. I was gonna cut the hole larger to stick my entire phone down in there, but I’ve already cut away all the soft crumbly stuff. If the drywall is that sturdy and dry, I just need to replace the shower arm and make sure it seals properly. Likely just the seal has been broken due to the fixture being 26 years old.

4-30-14 update: I replaced the shower arm and shower head!