If you want a real read on market health, you have to look beyond the S&P 500 (SPY) and the Nasdaq (QQQ).
There’s a whole world happening outside those two tickers.
And if you’re only staring at a couple of U.S. indexes in a vacuum, you’re missing most of the story.
That’s the trap a lot of traders fall into. I fell into it early in my career.
It took more than two decades of cycles – bulls, bears, and everything in between – to finally understand something simple:
If you don’t do the work, the market won’t show you anything.
If you want to see, you have to look.
Europe Hits New All-Time Highs
One of the best ways to gauge how “stocks” are really doing is to check in on what stocks outside the U.S. are up to.
Take Europe, for example. The STOXX 600 (SXXP) is the broadest benchmark for European equities – large caps, mid caps, and small caps across 17 countries.
It’s the entire region in one chart. And on Friday, it closed the week at its highest level ever:
This is exactly the kind of confirmation we look for.
It’s one thing for the S&P 500 to hit new all-time highs. But what about the rest of the world?
Well, Europe is not only keeping up – it’s leading in many cases.
Down the Cap Scale
It’s not enough to see what the big stocks are doing. We also want to know what’s happening under the surface.
Are the smaller names participating? Are they confirming the strength we’re seeing in the major indexes?
Take a look at the iShares Micro-Cap ETF (IWC).
These are the smallest publicly traded companies in America… and they’re hitting new all-time highs too:
If only the large-cap indexes were making new highs while everything else rolled over, that would be a major red flag.
Think late 1999: a handful of mega-caps were still rising while the rest of the market had already started breaking down.
We all know how that ended. But this environment doesn’t look anything like that.
More stocks are going up. More stocks are making new highs. We’re seeing expansion, not deterioration.
Participation is broadening down the cap scale, not narrowing.
Building the Puzzle
This work is both an art and a science.
We have the models. We have the data. We break things down every which way.
But there’s an element of market analysis that no machine can replicate: the human ability to see, to look around corners, connect dots, and assemble the bigger picture.
That’s what this is. It’s puzzle-building.
Every cycle is different. Bull markets rhyme with past bull markets, and bear markets rhyme with past bears – but none of them are identical.
If we’re not checking every corner, every index, every region, every market-cap tier, then we’re just guessing about the true health of equities.
And guessing is not a strategy.
Clarity comes from doing the work. When you take the time to actually look, the market starts to make a lot more sense.
That’s what we do here at TrendLabs. We put in the time. We put the pieces together.
Yes, the S&P 500, the Nasdaq, and the Dow matter. But they’re just a tiny slice of our weight-of-the-evidence approach.
First we identify the market we’re in. Then we choose the strategy that fits.
Most investors do the opposite.
They pick a strategy, fall in love with it, and then try to jam it into every market environment like a toddler forcing the wrong puzzle piece into the wrong hole.
That’s how you blow up accounts and miss entire cycles.
They’re wrong. Everybody’s wrong.
But when you build the puzzle the right way, the picture gets clearer – and a whole lot more profitable.
I appreciate you coming along for the ride and all the support you’ve shown along the way.
Now let’s go make some money, because this is the only puzzle that actually pays when you solve it.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs