Breadth is washed out while the indexes hold up
Technology is already breaking to new highs
A breadth thrust could fuel the next leg higher
Market breadth is awful.
There’s really no way around it.
Only 25% of S&P 500 stocks are above their 20-day moving average.
Just 23% are above their 50-day.
Yet more than 41% remain above their 200-day moving average.
That’s an unusual combination with the S&P 500 sitting right underneath record highs and technology already breaking out.
Many stocks have been beaten up underneath the indexes badly over the short-term.
But the longer-term structure and trend hasn’t collapsed.
And that distinction is important.. because breadth can resolve in two ways:
The leaders can finally break and drag the indexes down with them.
Or the stocks that have spent the last several weeks correcting can start catching up.
With QQQ knocking on the door of all-time highs, XLK already there, and equal-weight technology confirming the move..
I’m increasingly interested in the second outcome.
Breadth has become so compressed that if the market simply refuses to fall apart, we have the ingredients for a violent expansion in participation.
In other words:
Breadth may be getting so bad that it’s becoming good.
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The Nasdaq is knocking on the door
QQQ is sitting just underneath its highs with a legitimate chance to finish the week at record levels.
Look at the primary trend.
After briefly pulling back in the beginning of the year, QQQ broke out and ran.
Then QQQ spent months digesting the move rather than giving it back.. very normal to do after an aggressive advance higher.
Now it’s pressing against the top of the range again.
That looks like consolidation inside an uptrend.
And if QQQ pushes through?
I don’t think the interesting question will be whether breadth was bad last week.
The interesting question will be:
How quickly does the rest of the market begin participating?
Because there is a lot of room underneath the surface for stocks to start improving.
Technology is leading higher
Believe it or not.. XLK is already trading at all-time highs.
That’s exactly where I want to see leadership in a healthy market ready to continue higher.
Technology is one of the most important risk-on areas of the market.
When traders are willing to take risk, capital tends to find its way into innovation, software, semiconductors, AI and the companies producing the strongest earnings growth.
And right now the sector is leading once again.
But this gets even more interesting when we stop looking at the biggest companies.
This isn’t just a mega cap story
RSPT is the equal-weight technology ETF.
Every company is weighted roughly the exact same.. meaning there are no outlier companies to skew the direction of the trend.
And it’s also sitting at all-time highs.
That’s important.
One of the easiest bearish arguments to make during a narrow market is that a handful of huge companies are holding the entire thing together.
But within technology, that argument is getting harder to make.
The cap-weighted sector is breaking out.
The equal-weight sector is breaking out.
That tells us participation inside the market’s strongest sector is much healthier than the headline breadth numbers suggest.
The broad market may have a participation problem.
Technology does not.
Now imagine breadth starts turning
This is the part I’m watching closely.
I am not saying a breadth thrust has triggered.
It hasn’t.
I’m saying the market is increasingly set up for one.
Think about how compressed participation already is..
Only about 25% of S&P 500 stocks are above their 20-day moving average.
Only about 23% are above their 50-day.
We don’t need every stock in America to suddenly become a leader.
We simply need fewer stocks to be weak.
If those readings start moving back toward normal while QQQ, XLK and RSPT hold their highs, breadth could expand very quickly.
We could see a rubber band effect in the markets.. just like we saw in April 2025.
A move from 23% participation to 40% or 50% is a completely different market environment.
And if that improvement happens while the major indexes are breaking out?
That’s when things can get fun.
The leaders will go first
This is why I spend so much time talking about leadership.
The strongest stocks don’t wait for every breadth indicator to turn green.
They usually go first.. then the rest of the market catches up.
That’s what makes periods like this so valuable.
Here’s the leadership board in our TTI Universe. Notice anything similar?
Nine out of the top ten stocks are in the technology sector.
Weak breadth forces us to identify the names that are actually working.
Which stocks held up? Which ones kept making higher highs? Where did relative strength stay strong? Which industries continued attracting capital?
Those are the stocks I want to know before breadth expands.
Because if the market gets easier, the leaders don’t suddenly become less interesting.
They become more interesting. And I want to already own them.
Follow the money,
Hamilton
Founder, The Trading Initiative
P.S. This is exactly what we track every day inside The Trading Initiative: market conditions, leadership, capital flows and the stocks setting up before the move becomes obvious. If breadth starts expanding from here, I want us already focused on the leaders—not chasing them after the breakout. Join TTI and trade the next move with us.
I kept wondering, when does a lack of breadth make us prefer to be on the outside?