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Report Headlines
- Zweig Breadth Thrust Remains Active (bullish)
- 5/200 1% Cross Remains Active (bullish)
- SPY and S&P 500 Breadth are Majority Bullish
- About the Major index ETFs and Breadth Signals
- QQQ and Nasdaq 100 Breadth are Majority Bullish
- S&P 1500 Breadth Improves, but Remains Majority Bearish
- Yield Spreads Continue to Narrow and Show No Stress
- Fed on Hold and Behind
- 10-yr Yield Extends on Break Down
SPX and NDX Stocks in Bull Market
Stocks started their bull run with a Zweig Breadth Thrust on April 24th and SPY triggered a 5/200 one percent cross on May 15th. Long-term breadth indicators were lagging in May, but started catching up in June with the Nasdaq 100 turning net bullish on June 10th. QQQ and Nasdaq 100 stocks led the surge off the April lows and continue to lead. The S&P 500 followed by turning net bullish on July 22nd as the market advance broadened. In fact, S&P 500 High-Low% exceeded +10% for the first time since late November 2024. Small-caps and mid-caps continue to lag large-caps and large-cap techs. S&P 1500 breadth indicators improved over the last few months, but have yet to cross their bullish thresholds. This is the last piece of the bull market puzzle. Elsewhere, yield spreads fell sharply in May and returned to bullish levels by the end of the month. These spreads remain narrow and show no stress in the credit markets.
Technical Event Timeline
- July 22nd: S&P 500 Evidence turns Bullish
- June 10th: Nasdaq 100 Evidence turns Bullish
- May 15th – Bullish Cross SPY 5/200 day %Difference > 1%
- May 12th – SPY/QQQ Gap above 200-day SMAs
- April 29th – Bullish Thrust S&P 1500 %Above 20-day SMA
- April 24th – Bullish Zweig Breadth Thrust
- April 4th – Capitulation
- March 11th: S&P 1500 Evidence Turns Bearish
Zweig Breadth Thrust Remains Active
A Zweig Breadth Thrust triggered on April 24th and SPY also moved above the lower Keltner line (65,2,65). As laid out in this strategy report, the breadth thrust is bullish as long as SPY holds the lower Keltner line. Five consecutive closes below the lower Keltner line would negate the Zweig Breadth Thrust.
5/200 1% Cross Remains Active (bullish)
The chart below shows the 5 and 200 day SMAs for SPY, and the percentage difference between the two in the indicator window (Percent above MA(5,200,1). A bullish signal triggers when Percent above MA crosses above +1% (blue line on May 15th) and the bearish signal triggers with a cross below -1% (pink lines). The 5-day moved more than 1% above the 200-day SMA for a bullish trend signal on May 15th. As with all trend-following indicators and moving average crosses, there will be whipsaws (bad signals) and extended trends (good signals). See this research report on the 5/200 day SMA cross for SPY, QQQ, MDY and IJR.
This indicator is one of eleven in the TIP Indicator Edge plugin for StockCharts ACP.
SPY and S&P 500 Breadth are Majority Bullish
The S&P 500 indicators turned majority bullish on July 22nd. SPY crossed above the upper Bollinger Band on June 24th, %Above 200-day exceeded 60% on July 1st and %Above 150-day exceeded 70% on July 22nd. Most recently, High-Low Percent exceeded +10% for the first time since November 27th. We are finally seeing new highs expand and this means more leaders are emerging within the S&P 500.
About the Major index ETFs and Breadth Signals
The top window on each breadth chart shows the corresponding major index ETF with Bollinger Bands (125,1). An uptrend signals when the ETF breaks above the upper Bollinger Band and a downtrend signals with a break below the lower band. The index ETFs are the S&P 500 SPDR (SPY), Nasdaq 100 ETF (QQQ) and S&P 500 EW ETF (RSP).
Each index has four breadth indicators. SPY uses S&P 500 breadth, QQQ uses Nasdaq 100 breadth and RSP uses S&P 1500 breadth.
- The percentage of stocks above the 200-day SMA triggers bullish with a move above 60% and bearish with a move below 40%.
- The percentage of stocks above their 150-day SMAs triggers bullish with a move above 70% and bearish with a move below 30%.
- The percentage of stocks above their 100-day SMAs triggers bullish with a move above 80% and bearish with a move below 20%.
- High-Low Percent triggers bullish with a move above +10% and bearish with a move below -10%. High-Low Percent is the percentage of stocks making 52-week highs less the percentage making 52-week lows.
These bullish/bearish signal thresholds are designed to identify significant changes in the stock market (bull market or bear market). As trend-following signals, they will lag and there will be whipsaws. Long-term, these signals keep us on the right side of the market. The idea is to be invested during bull markets (risk-on) and in cash during bear markets (risk-off).
QQQ and Nasdaq 100 Breadth are Majority Bullish
The Nasdaq 100 indicators turned majority bullish on June 10th. The blue arrows and dates on the right side of the chart show when these signals triggered. QQQ and NDX breadth were the first to trigger bullish and they continue to lead the market. Over 70% of Nasdaq 100 stocks are above their 200, 150 and 100 day SMAs. This reflects broad strength within the index.
S&P 1500 Breadth Improves, but Remains Majority Bearish
S&P 1500 breadth remains majority bearish since March 11th. The S&P 500 EW ETF (RSP) triggered an uptrend signal with a break above the upper Bollinger Band on June 30th, but the S&P 1500 breadth indicators have yet to breach their bullish thresholds. They are, however, improving and getting close. The gray dashed arrow lines show this improvement since the April low. S&P 1500 %Above 200-day SMA is at 53.93% and needs to clear 60% for a bullish signal. Note that this also means that 46% of S&P 1500 stocks are below their 200-day SMAs, which is a large portion.
The S&P 500 EW ETF (RSP) triggered an uptrend signal with a break above the upper Bollinger Band on June 30th. The percentage of stocks above their SMA indicators continue to improve as they near their bullish thresholds (gray arrow lines). S&P 1500 %Above 200-day SMA is at 57.6% and needs to clear 60% for a bullish signal. This would indicate that the vast majority of S&P 1500 stocks are above their 200-day SMAs (in uptrends).
Yield Spreads Continue to Narrow and Show No Stress
The chart below shows SPY, the Junk Bond Spread ($$HYIOAS) and the BBB Bond Spread ($$BBBOAS). The Junk Spread and the BBB spread fell back to their March levels in mid May (blue shading) and then worked their way lower the last few months (blue arrow lines). Both are below their 200-day SMAs. This narrowing shows confidence in the credit markets and is bullish for stocks.
The yield spread is the difference between the Junk Bond Yield or BBB Bond Yield and a comparable Treasury Bond Yield. Junk and BBB bonds represent risk assets, while Treasuries represent relative safe-havens. The spread is the risk premium for holding the riskier assets. Narrow/narrowing spreads show confidence and this is bullish for stocks. Wide/widening spreads show stress and this is negative for stocks.
Fed on Hold and Behind
The top window shows the Fed Funds Target Rate ($$FEDTGT) and the 2-yr Treasury Yield ($UST2Y). $UST2Y typically leads the Fed Funds Rate. Notice how $UST2Y turned up in late 2021, well ahead of the tightening cycle. Also notice how it turned down in summer 2024, ahead of the easing cycle. $UST2Y remains below the Fed Funds Target Rate and this suggests that the Fed is behind the curve. The middle window shows the 3-month Treasury Yield ($UST3M), which also tends to lead the Fed. $UST3M has been range bound between 4 and 4.5 percent for 2025, which means the Fed is on hold. A break from this range will provide the next directional clue for the Fed.
Several factors influence short-term Treasury yields, but they are still closely aligned with Fed policy and often lead the Fed. This means the yield often peaks (troughs) and turns down (up) before the Fed starts to lower (raise) rates. We use the 3-month Treasury yield to identify current Fed policy and anticipate the next Fed move
10-yr Yield Remains with Breakdown
The next chart shows the 10-yr Treasury Yield ($UST10Y) as a line plot to filter out some of the noise. First, there is a long-term downward bias with a lower high and lower low sequence over the last two years (pink dashed lines). The yield rose with a rising wedge in April-May and broke down with a sharp decline in June. This breakdown signals a continuation lower. $UST10Y bounced in July, but the June wedge break remains the dominant feature. Re-evaluation resistance is at 4.55 (June high plus a buffer).
The 10-yr Treasury Yield is the most important benchmark for long-term rates and mortgages. The bottom window in the chart above shows $UST10Y with the EW Consumer Discretionary ETF (RSPD). Several factors influence long-term Treasury yields: growth expectations, inflation expectations, government debt levels, tariffs and foreign bond holders. The 10-yr Treasury Yield typically falls when the economic outlook dims and/or inflation expectations rise. Conversely, the yield typically rises when the economic outlook is bright and/or inflation expectations fall.