Lately, you’ve probably heard a lot of noise about “breadth deterioration” and “weakening markets.”
But when you actually go in and count — you know, like a grown-up — it turns out to be the exact opposite.
Leaders are leading, and former laggards are getting rotated into.
The S&P 500, Nasdaq-100, and Dow Jones Industrial Average all closed October at new all-time highs.
This week, as follow through, most S&P sectors were up once again, with money rotating into areas like Healthcare and Energy — leadership we haven’t seen all year (or even last year).
That’s not weakness. That’s breadth expansion. That’s sector rotation. More stocks are now participating in this bull market, not fewer.
In fact, more stocks on the NYSE finished this week above their 20-day and 50-day moving averages than they did last week.
And as the week progressed, more and more stocks on the NYSE were able to get above their 200-day moving averages (in uptrends).
So no, market breadth isn’t “deteriorating.” It’s actually been improving.
Tell that to someone on Twitter and they’ll tell you that you’re crazy — because humans hate counting.
Personally? I love it.
Still an Uptrend in the NYSE Composite
The New York Stock Exchange Composite Index represents the stocks trading on the world’s most important stock exchange.
After finishing September at its highest level ever, the NYSE Composite spent October moving sideways. So far, November looks about the same — still relatively flat.
By my math, that’s a well-earned consolidation after four straight months of new all-time highs.
These are the kinds of pauses you see in strong bull markets.
You Only Know if You Bother To Count
As you hear me say all the time, the humans hate counting. They’ll spend their entire careers trying to invent systems or shortcuts to avoid the simple act of doing the math.
But since I actually do count, I can tell you with confidence: More and more stocks are participating in this bull market.
The crowd is ignoring some of the most important developments in all of equities — not out of malice, but simply because they haven’t even bothered to look.
Take Technology, for example. If you went by this week’s headlines, you’d think Tech stocks were completely imploding.
Meanwhile, the S&P Small-Cap Technology Index just closed at new all-time highs. Again.
Technology is actually on pace to become the largest weighting in the Russell 2000 Small-Cap Index.
It’s right on the verge of overtaking Financials, which is only ahead by just a few basis points. Tech already outweighs Industrials and even Healthcare.
So if you’re wondering what’s driving this strength in Small-Caps, look no further than the very sector the headlines keep insisting is “falling apart.”
Here’s that same Small-Cap Tech Index — not just closing at new all-time highs, but also breaking out to fresh 52-week highs relative to the Large-Cap S&P 500.
That’s dominance.
That’s leadership.
And that’s exactly what you see when bull markets are broadening, not deteriorating.
The truth is simple: More and more stocks are participating — not fewer.
But if your “breadth analysis” consists of taking two random numbers and dividing them by each other, you’ll never see that.
When someone pulls out the new highs list, divides it by the new lows list, and calls that “deterioration,” do them a favor — tell them to go see a therapist.
That’s not analysis. That’s laziness.
And it’s the kind of laziness that makes people miss the best rotations happening anywhere in global markets.
So do the work. Go one by one. See it with your own eyes.
Or don’t — and I’ll just keep counting for you.
Because you know I actually count. And I always will.
This Week in Everybody’s Wrong
On Monday, we talked again about why we need to invest like Earthlings.
If you really want to understand the market, you must look beyond U.S. borders.
And things look pretty good around the rest of the world right now…
On Tuesday, we described what evolution looks like in a bull market.
The ability to adapt is what separates winners from losers.
Here’s how to stop investing like a Neanderthal.
On Wednesday, we broke down the good, the bad, and the ugly in the current market landscape.
It always comes back to your time horizon.
But, at the end of the day, it’s still a bull market.
On Thursday, we made fun of what’s probably the worst stock market sentiment indicator on the planet.
CNN outdoes them all, but there’s a ton of bad sentiment data out there.
That’s OK, because we’ve lived through the cycle, we’ve run the numbers, and we’ve done the work.
On Friday, we addressed another very basic question.
Are you really keeping up with the market?
Here’s why we skate to where the puck is going.
On Saturday, we welcomed back Grant Hawkridge for some refreshing perspective on the stock market.
Grant always keeps it simple and sticks to the data.
Here he is, fresh off a golf hiatus, with a look at what’s really happening out there right now.
Have a great Sunday.
We’ll see you Monday morning…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs