There’s been a lot of chatter lately about market breadth — and, as usual, most of it is wrong.
Let’s start with the basics: this is a market of stocks. There are about 500 in the S&P 500, 30 in the Dow, 100 in the Nasdaq 100, and 2,000 in the Russell 2000.
It’s never been “just seven stocks” carrying the market — despite what the headlines have been screaming for years. That was always a lazy narrative, pushed by people who never bothered to actually count.
And that’s really the problem. When it comes to breadth, people form strong opinions without ever doing the simplest thing: adding up the numbers.
Counting isn’t complicated. But somewhere along the way, Wall Street decided it was above second-grade math — trying to build endless algorithms and models instead of just looking at the data.
Humans overcomplicate everything.
They’d rather sound smart than be right.
Healthy Rotation = Market Breadth
We can talk about how more than 60% of stocks on the NYSE are above their 200-day moving average — perfectly consistent with what you’d expect in a healthy bull market.
We can talk about how every major U.S. sector is in an uptrend right now, with the only exceptions being Consumer Staples and Materials — both of which tend to lag when risk appetite is strong.
I could show you that the Russell 2000 Small-Cap Index just closed at a new all-time high on Monday.
Or that the Russell 3000, which represents approximately 98% of all investable assets in the U.S., followed with its own record close on Tuesday.
We can go through all of that data.
But today, I want to focus on something even more important — the Risk-On ratio of all Risk-On ratios, which just hit a new all-time high yesterday.
We’re talking about Consumer Discretionary vs. Consumer Staples — the ultimate risk-on, risk-off gauge:
In healthy bull markets, portfolio managers tend to overweight Consumer Discretionary stocks — companies tied to housing, autos, retail, and other areas where consumers spend their extra money.
When investors are confident, these stocks lead. When they start to lag, that’s usually one of the first signs something’s changing beneath the surface.
Right now? Discretionary is leading. And that’s exactly what you want to see in a strong, risk-on market.
In the denominator of that chart are the Consumer Staples — the essentials people buy no matter what’s happening in the economy. Toilet paper, cigarettes, alcohol, laundry detergent, potato chips — the “need it whether times are good or bad” category.
So when Consumer Discretionary stocks are outperforming Staples, it tells you investors are confident. Money is rotating into the areas that benefit from stronger spending — not retreating into safety.
That kind of sector rotation is exactly what fuels a healthy bull market.
We talked about the same thing yesterday when the S&P 500 High Beta Index hit new all-time highs relative to Low Volatility.
The message is consistent — risk-on leadership is alive and well.
So What Do We Buy?
During bull markets, history is clear — it pays to be long stocks, not short them, and certainly not sitting in cash.
Consumer Staples are breaking down this week because nobody wants them. That’s not a red flag — that’s healthy sector rotation. It’s one of the clearest signs of broad market strength.
Our focus now is on Consumer Discretionary — the “Wants.” That’s where relative strength is showing up, and that’s where we want to be positioned.
Sure, there’ll come a time to rotate back into more defensive areas. The market will tell us when that time comes.
But that day isn’t today.
Right now, the offense is on the field — and we’re still running our plays.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs