The S&P 500 Index has been on a historic bull run for 32 months.
Coming out of the 2022 to 2023 bear, the S&P notched its first all-time high on January 19, 2024, exactly 32 months and 12 days ago.
The ensuing 11 months… saw 56 more. Followed by 39 all-time highs set in 2025… and 27 more so far this year.
The “market” has doubled from its early 2023 lows.
In the daily headlines, the index looks healthy and has drawn a historically high percentage of household wealth into the stock market; one feature of a crack-up boom, when individuals see stocks as their only option to beat inflation.
Trouble with headline index highs like this? The rest of the stock market is crotte.
Large-cap analysts worry about “bad breadth.” Rightfully so, because it’s just as sour as it sounds.
When market breadth is strong, stocks move higher together. When breadth is weak, a small group of large stocks carries the index while the rest of the market lags and falls, with some even entering bear-market territory with little to no mention.
The S&P 500 can sit near all-time highs for months, years, even as a large share of its members are already struggling. MarketWatch reported this week that more than 40% of S&P 500 stocks were trading at least 20% below their 52-week highs, even as the index itself was up for 2026 and still close to its record.
Another way to see it: the market-cap-weighted S&P 500 has been crushing the equal-weighted S&P 500. As Barron’s observed this morning, the cap-weighted index is on pace for its largest outperformance of the equal-weight index since March 2026.
The equal-weight S&P 500 fell 4.4% in September, its worst month since March 2020.
The biggest AI-linked names can keep lifting the index even while many smaller or less fashionable stocks weaken. Nvidia (NVDA) alone accounted for 8.4% of the SPDR S&P 500 ETF Trust (SPY), underscoring how much one stock can influence the headline index.
A normal investor looking only at the S&P 500 might think, “The market is fine.” A trader looking underneath the index sees fewer soldiers following the generals up the hill.
The last time market breadth was this bad, stocks were in a stealth crash, but your average investor didn’t know it:
The historical comparison is the warning.
Ned Davis Research found that fewer than 25% of S&P 500 stocks recently traded above their 50-day moving averages, and fewer than 45% traded above their 200-day moving averages, while the index remained less than 3% from record highs.
Similar divergences have appeared only a handful of times, including periods near prior bull-market peaks.
In late 1973, investors were near the front edge of the 1973 to 1974 bear market. And again in late 1999, the dot-com leaders were still levitating while many stocks had already rolled over.
The comparison does not necessarily mean a 2027 bear market. But it does indicate the current setup belongs to a small elite club in a market of misfits.
For practical purposes this morning, Andrew notes stock pickers have fewer places to hide. Many sectors and individual names are already weak. And they are getting weaker.
The strongest opportunities remain concentrated in the AI winners and the companies tied to them.
Instead of trying to buy the whole market, Andrew is looking at a basket of leading stocks that continue to attract capital while the rest of the market thins out.
~ Addison
P.S. We’ll be back with Grey Swan Live! this afternoon with Shad Marquitz.
We’ll be sharing our insights from last week’s trip to Colorado to interview mining executives, as well as what we’re seeing in the resource space now.
And tomorrow on the Grey Swan Trading Fraternity, Andrew and I will cover what to expect in markets in the fourth quarter of the year. Some sectors perform much better than others – and stocks tend to set up for a year-end rally. We’ll look at the bull and bear case.
Again, we’re at a special time this week: Friday at 3 p.m. ET
