Coming into 2026, I had no idea what the market was going to do.
Neither did you. Neither did anyone.
That’s the point.
But we did not enter this year blind. We entered it with context.
Technology was the best performing sector of 2025. Energy and consumer staples were left for dead.
The gap between the biggest winners and biggest losers had stretched to historic extremes.
When you see that kind of imbalance, you don’t need a crystal ball. You just need some common sense.
Mean reversion was likely. Rotation was likely. And, most importantly, dispersion was likely.
“Dispersion” was the word I used coming into the year. Not because of some fancy model or secret formula. Just logic.
When trends get crowded and positioning gets one sided, leadership changes. And when leadership changes, the gap between winners and losers widens.
Six weeks into 2026, that’s exactly what we’re seeing.
The S&P 500 is flat for the year. No progress. Meanwhile, the median stock in the index is up more than 7%. More than 200 components are already up double digits.
At the same time, every single member of the Magnificent 7 is down on the year. Those former darlings, now known as the “Lag 7,” are hitting their weakest relative levels since last summer.
The S&P 500 is going nowhere. Underneath the surface, however, everything is happening.
Dispersion is not just a theme. It’s the defining feature of this market.
And for active investors, that changes everything.
If all you own is the S&P 500, you’re treading water.
If you’re willing to dig into sectors, industries, and individual stocks, this is one of the most opportunity-rich environments we’ve seen in years.
Let’s look at just how extreme this has become.
Dispersion: 99th over the Past 30 Years
The S&P 500 is still stuck below that 7,000 level we’ve been talking about for weeks.
On the surface, it looks like nothing is happening.
Below the surface, it’s chaos.
The average and median stock in the United States continue to surge even as the headline index goes nowhere.
According to Nomura, the gap between the biggest winners and biggest losers inside the S&P 500 ranks in the 99th percentile over the past 30 years.
Ninety-ninth percentile.
While the index has barely moved over the past month, the average stock in the S&P 500 has gained more than 10%:
That’s not normal. That’s extreme internal dispersion.
Nomura also pointed out that, in the past, this kind of spread between winners and losers has sometimes shown up around major turning points.
It appeared near the peak of the dot com bubble. It showed up around the financial crisis.
But context matters. In both of those cases, dispersion hit extremes very late in the cycle.
You also saw similar readings near the end of the 2008 collapse, just months before the ultimate bottom, when forward returns were actually very strong. The same thing happened in October 1998, right before one of the greatest years in stock market history.
So, what does this mean for the broader market?
The honest answer is “not much.”
Extreme dispersion does not automatically translate into a bearish or bullish signal for the index.
Sometimes, it shows up near tops. Sometimes, it shows up near bottoms. Sometimes, it shows up in the middle of powerful trends.
What it consistently signals is change.
And that’s where this gets interesting.
Not Bullish or Bearish, Just Different
People ask me all the time whether I’m bullish or bearish.
The older I get, the less useful that question becomes. I’m not interested in planting a flag and defending it.
I am interested in owning things that I think are going up and avoiding, or shorting, the things that I believe are going down.
That mindset has served me, my family, and all the traders at TrendLabs far better than trying to label the entire market with one word.
Look at February alone.
Energy, consumer staples, utilities, and materials are ripping. Some of the most hated groups coming into the year are now leading.
Meanwhile, technology, communications, consumer discretionary, and parts of financials are under pressure.
That’s not a broad bull market. It’s not a broad bear market, either.
It’s rotation on steroids.
“Dispersion” was the word coming into 2026. It’s still the word today. And, if anything, it looks like it’s expanding, not contracting.
This doesn’t make the market good or bad.
It makes it selective.
If you’re waiting for a clean, simple environment where everything moves together, you’re going to be frustrated.
If you’re willing to adapt, dig into sectors, and separate leaders from laggards, this is one of the most opportunity-rich tapes we’ve seen in years.
The index might be flat. That doesn’t mean nothing is happening.
It means you have to do the work.
Dispersion is not noise. It’s the opportunity.
Adapt.
Or watch it happen without you.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs