The relative ratio of the Momentum Index versus the S&P 500 Index has reached a fresh 41-month new high.
Here’s the chart:
Let's break down what the chart shows:
The black line in the top panel shows the relative ratio of the Momentum Index versus the S&P 500 Index.
The redline is the 200-day moving average of the relative ratio.
The blue line is the 50-day moving average of the relative ratio.
The greenand redline in the bottom panel represents the daily Relative Strength Index (RSI) for the relative ratio. When the line is green, it indicates that the daily RSI is in a bullish regime, while a red line signifies that the daily RSI is in a bearish regime.
The Takeaway: This ratio just broke out to its highest level since December 2021. That tells me something simple… Investors are getting more aggressive.
They’re buying strength. They want exposure to risk...
We saw stage one of the breadth cycle... I’m now on the lookout for stage two.
Here’s the chart:
The Takeaway: First, I want to give a huge shoutout to Mike Hurley, who taught me this way to look at the stock market!
We recently saw stage one of the breadth cycle.
In my framework, that means Spring is here.
On May 12th, over 55% of S&P 500 stocks made 20-day highs. That’s a breadth thrust — the kind of signal we only see at major turning points. It marks the beginning of a new leg higher, not just for a handful of stocks, but across the board.
But first, a quick recap on how we define the breadth cycle.
I break the market into four seasons:
Spring: The reset. It starts with a breadth thrust — shown as a green line in our chart.
Summer: The uptrend and momentum strengthen. Breadth and leadership move together.
Fall: A warning sign. An unusual spike in the 52-week lows marks the “first fall day” — the red line.
My Core Market Model has risen back above the zero line.
Here’s the chart:
The Takeaway: My Core Market Model brings together three key areas: breadth, liquidity, and sentiment.
Breadth looks at how many stocks are participating. I check things like 20-day highs and how many stocks are above their 50-day moving average.
Liquidity shows where money is moving. Are investors choosing stocks over bonds? Are high-yield bonds acting better than Treasuries? What’s the momentum in yields?
Sentiment measures positioning and fear. I watch NAAIM exposure, Investors Intelligence, and the VIX.
I don’t act on one piece of data. I combine them all, then smooth the result with a 5-day moving average.
It’s not a buy or sell tool. It’s a way to read the environment.
When the model is above zero, I treat it as a bullish backdrop… Below zero, it’s bearish.
