u/sytian360

I’ve been following the breadth weakness underneath SPY for the past few weeks, and something interesting is starting to show up when I compare the S&P 1500 with the S&P 500.

The first chart is S&P 1500 breadth; the second is S&P 500 breadth.

The clearest difference is in the % of stocks above their 20-day MA.

S&P 1500:

20DMA: 31.0%

50DMA: 25.1%

200DMA: 46.2%

S&P 500:

20DMA: 26.4%

50DMA: 24.8%

200DMA: 44.8%

The S&P 1500 short-term breadth looks like it has formed a more recognizable bottom and is beginning to turn higher, while the S&P 500 version is still much less convincing.

That caught my attention because the S&P 1500 adds mid- and small-cap stocks, which have been beaten down particularly hard. It raises the possibility that the first signs of breadth recovery are starting outside the large-cap S&P 500 names.

But I wouldn’t call this a broad breadth reset yet. The 50-day readings are still almost identical and very weak, while fewer than half of the stocks in either universe are above their 200-day MA.

So for now I see this as a short-term green shoot rather than confirmation. If it’s real, I’d expect the 20D improvement to persist and eventually start pulling the 50D measure higher.

The other possibility is simply mean reversion in the most beaten-down mid/small-cap stocks.

Do you see this as the beginning of broader participation — or just an oversold bounce outside the mega-cap leaders?

The S&P 500 is still close to its recent high, but underneath the index, breadth has deteriorated sharply.

Among S&P 500 stocks:

• 18.7% are above their 20-day MA
• 33.6% are above their 50-day MA
• 57.6% are still above their 200-day MA

So fewer than 1 in 5 stocks are above their 20-day average, while the longer-term structure remains mostly intact.

That leaves two very different interpretations.

Bearish: breadth is deteriorating well ahead of the headline index. The S&P 500 may still have further downside as price catches up with weakening internals.

Bullish: much of the market may have already gone through a correction beneath the surface. With short-term breadth this depressed, we could be closer to a washout than the index itself suggests.

The problem is that a washout is not the same thing as a reversal.

I’d rather see breadth actually turn before getting bullish — but the stronger the confirmation, the later the entry. By the time you get a full breadth-thrust type confirmation, the market can already be well off the low.

That, to me, is one of the hardest parts of TA:

The data can tell you very clearly where the market is, without clearly telling you what to do.

So how do you handle the tradeoff?

Buy the extreme, wait for early breadth improvement, or wait for full confirmation?