The S&P 500 is sending us a pretty clear message lately—one that deserves our attention. Right now, a whopping 87% of S&P 500 stocks are trading above their 20-day moving averages, with more than half hitting new 20-day highs. Let me be blunt: this is absolutely not what a dying market looks like.
I've been watching markets long enough to know when something smells fishy. Real bear markets don't show this kind of widespread strength. They're more like exclusive nightclubs where only defensive stocks get past the velvet rope while everything else waits outside in the rain. What we're seeing now? It's more like the bouncer just waved in almost everyone standing in line.
There's this framework I think about—call it the "participation rate transition" if you want to sound smart at dinner parties. When markets truly tank, participation narrows dramatically. You'll see a handful of stocks maintaining appearances while everything else behind the curtain is getting absolutely hammered. It's financial theater with just a few actors on stage. Now? We've got nearly 90% of the cast in perfect sync, dancing above their trend lines.
Look at market history. This broad-based strength simply doesn't materialize during genuine bearish periods. It's like expecting to find a polar bear in the Amazon—theoretically possible, I guess, but I wouldn't bet my 401(k) on it.
What about those classic bear market rallies you keep hearing about? They typically feature violent upward moves in the most beaten-down names—your textbook "dead cat bounce" where yesterday's disasters suddenly look like bargains. But the data isn't showing that pattern at all. We're seeing methodical, broad-based strength that spans most sectors.
Now, does this guarantee we're in the clear? Of course not. (Markets have made me eat my words more times than I care to admit.) But if you're positioning for continued doom and gloom based solely on technical indicators, you might want to reconsider your stance. The market isn't just whispering—it's practically shouting through a megaphone—that something more constructive is happening under the hood.
The psychological aspect is fascinating here. Markets don't move cleanly from fear to greed—they lurch forward in fits of disbelief. We're in that weird phase where many investors remain defensively positioned while the market signals a regime change. This creates that classic "wall of worry" that bull markets love to climb.
So the next time someone at your office starts doom-scrolling about the "ongoing bear market," maybe point them toward this breadth data. It doesn't guarantee anything—nothing in markets ever does—but it strongly suggests we're dealing with something other than a market in decline.
And honestly... isn't that refreshing when headlines seem to be competing for who can paint the most apocalyptic economic picture? Sometimes what's happening inside the market tells a completely different story than what we're reading about.
