S&P 500 market breadth data is worth paying attention to. Seventy-two percent of its constituents are trading above the 200-day moving average—its best condition since last December.
At the end of May, it was still only 60%; by mid-July it climbed to two-thirds, and now it has further expanded to 72%. This change suggests that the market rally is no longer propped up by just a few large tech stocks—more sectors and individual stocks are starting to participate.
Improving breadth often means a firmer foundation for a bull market, but it’s also important to be cautious. When participation becomes too high, a phase top is often not far off. Historically, extreme market breadth (above 90%) tends to occur in the late stages of the cycle.
At 72%, we’re in a healthy range—but if it continues to spread rapidly, we should watch whether capital begins chasing lower-quality names. The market always swings between two ends of the pendulum; the transition in breadth from extremely narrow to extremely broad is a reflection of the shift from panic to euphoria.
At the end of May, it was still only 60%; by mid-July it climbed to two-thirds, and now it has further expanded to 72%. This change suggests that the market rally is no longer propped up by just a few large tech stocks—more sectors and individual stocks are starting to participate.
Improving breadth often means a firmer foundation for a bull market, but it’s also important to be cautious. When participation becomes too high, a phase top is often not far off. Historically, extreme market breadth (above 90%) tends to occur in the late stages of the cycle.
At 72%, we’re in a healthy range—but if it continues to spread rapidly, we should watch whether capital begins chasing lower-quality names. The market always swings between two ends of the pendulum; the transition in breadth from extremely narrow to extremely broad is a reflection of the shift from panic to euphoria.