February is in the books, and it just delivered one of the most impressive displays of underlying strength we’ve seen in this cycle.
Seasonally, this is supposed to be one of the weakest months of the year for equities. In fact, only September has a worse historical track record.
And yet, while the headlines focused on a sideways, frustrating S&P 500, the equal-weighted index quietly did something remarkable: It closed at a new all-time high every single week during February.
That tells us the average stock isn’t struggling at all.
The median S&P 500 component, in fact, gained 4% in February and is now up nearly 8% for 2026. That’s not narrow leadership. That’s broadening participation.
At the same time, we’re coming out of the weakest stretch of the strongest seasonal window of the year — the November-through-April period — and heading into what historically has been a constructive two-month run before the summer doldrums.
So depending on which index you’re watching, this market either:
- hasn’t made any progress in four months; or
- is in the middle of a powerful expansion in participation and new highs around the world.
That’s the puzzle we’re trying to solve today.
Because when the benchmark looks stuck but the average stock is thriving, it forces an important question:
Is this a warning sign?
Or is this exactly what a healthy bull market rotation looks like?
Same Market, Two Different Stories
The S&P 500 is the benchmark. It’s the scoreboard most managers are judged against.
And for the last four months, that scoreboard hasn’t gone anywhere.
Price today is sitting right around where it was at the end of October — which, on the surface, makes it look like the market has stalled.
But that’s only true if you’re looking at the cap-weighted index.
Because the traditional S&P 500 is dominated by its largest components. When those few names pause, the entire index appears stuck — even if the other 493 stocks are working.
Equal-weight the index, treat every stock the same, and you get a completely different message.
The equal-weighted S&P 500 just closed at new all-time highs every single week in February:
That’s not narrow leadership. That’s participation.
The average stock is rising. The median stock is rising.
The advance–decline line is at a new high.
That’s what healthy markets look like.
So the real question isn’t whether stocks are doing well.
The real question is: Is it a problem that the mega caps are resting while everything else catches up?
Or is this exactly what rotation in an ongoing bull market is supposed to look like?
Because it’s not just equal-weighted large caps:
- the Dow Transports just closed the month at new all-time highs;
- the Russell 2000 closed the month at new all-time highs;
- the S&P Mid-Cap 400 closed the month at new all-time highs; and
- the FTSE All-World ex-U.S. Index has now been up for 10 consecutive weeks and is also at new all-time highs.
That’s not deterioration. That’s expansion.
Yet the pushback I keep hearing is that this is a warning sign.
That this divergence is a problem.
Which brings us to the real story, because when the data says one thing and the narrative says another, what we’re really talking about is positioning and sentiment.
If This Is a Top, Why Is No One Long?
This is where sentiment enters the conversation.
The National Association of Active Investment Managers publishes its weekly Exposure Index, a measure of how much equity exposure professional managers are actually running.
Not what they’re saying. What they’re doing.
This week that number came in at 74.93, the lowest reading since last May:
So let’s line up the facts:
- the equal-weighted S&P 500 is at new all-time highs;
- the advance–decline line at new highs;
- small caps, mid caps, and transports are breaking out; and
- global stocks are ripping higher.
And active managers are reducing their exposure.
That’s not excess optimism. That’s skepticism.
That’s cash on the sidelines. That’s fuel.
Because sustained bear markets don’t start with expanding participation and underinvested managers.
They start with euphoria and full positioning.
So which environment are we in? A stalled index, or a broadening advance?
Distribution, or rotation? A problem, or dry powder?
You can make the call if you want.
I’m more interested in what the market decides.
We have new highs in breadth, new highs around the world, and managers still not fully committed.
That’s the setup.
From here, price will do what it always does: prove one side right and the other side wrong.
We’ll just listen.
This Week in Everybody’s Wrong
On Monday, we checked the global stock market scoreboard.
The S&P 500 was up 17% last year, but emerging markets were up 34%.
The real question is, are you participating in what’s working today?
On Tuesday, we talked about how we don’t get sustainable bull markets in America without financials.
And we broke down some divergences developing within the sector.
Bottom line, if the structure shifts, we’ll follow the strength.
VanEck is rebranding its Gaming ETF as the “Degen Economy ETF” as of the close on April 8.
That name is something else, but the message is the real thing here.
We explained what this rebrand means on Wednesday.
On Thursday, the S&P 500 was just shy of a new all-time high and the S&P 500 Advance-Decline Line had just closed at its highest level ever.
And for the second week in a row more individual investors are bearish than bullish.
Let’s take some time to think about what that means for us.
On Friday, we celebrated the end of February and the fresh monthly candlestick charts we’ll get after the closing bell.
There’s nothing in my process that adds more value than ripping through monthly candlesticks.
Looking for a structural advantage? Here it is.
On Saturday, Jason Perz shared an update on the commodity cycle.
It starts with gold, accelerates with copper, and finishes with oil.
And the energy phase is just getting started.
Have a great Sunday.
We’ll see you Monday morning…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs