The Market Looks Strong… Until You See This

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The Market Looks Strong… Until You See This

The truth about all-time highs, weak internals, and when you should actually trade.

In partnership with

đź§­ When Should You Trade?

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The $NASDAQ ( 0.0% ) and $SPX ( â–˛ 0.26% ) are hitting all-time highs, and it feels like the perfect time to load up on stocks.

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But here’s the thing: the surface never tells the whole story.

Nasdaq Daily

đź’ˇ Market Internals Tell the Truth

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Most traders don’t realize that indexes like the NASDAQ 100 aren’t equal weighted.
A handful of mega-caps move the entire market.

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As of October 2025, just seven companies — Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia, and Tesla — make up roughly 37% of the S&P 500’s market cap.

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So when those giants rise, the market looks strong on paper…
…but the other 490 stocks might actually be struggling.

📊 A Clearer Lens: Watch the $RSP ( ▲ 0.22% ) 

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The $RSP ( â–˛ 0.22% ) is the equal-weight version of the S&P 500, where every stock counts the same.

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It gives a much more realistic view of how the average stock is performing.

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While the $SPX ( ▲ 0.26% ) races higher, the $RSP ( ▲ 0.22% ) has only been drifting up slowly — a quiet sign of underlying weakness.

RSP Daily

⚠️ Another Red Flag: $S5FI

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The $S5FI measures how many stocks are trading above their 50-day moving average.

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Even as the market drifts higher, this number has been dropping — meaning fewer stocks are actually participating in the rally.

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It’s like watching a parade where half the band has already dropped out.

S5FI

Stick With the Strongest Stocks

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The first thing this confirms is simple:
You should always stay in the highest-performing stocks in the market.

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If you go hunting for “bottom feeders,” you’ll end up stuck in weak names that drag you down.

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But if you focus on stocks with high relative strength, you’re participating in the strongest part of the market — the leaders that tend to bounce back first and move the furthest.

🎯 What This Means for Traders

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Let’s simplify it with numbers:

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Imagine you risk 1% of your account on each trade.
If the trade works, you make 2.5% — that’s a 2.5R trade, meaning you earned 2.5 times your risk

Market Type

Win Rate

Average Win (R)

Average Loss (R)

Net Result (per 10 trades)

✅ Good Market

40%

+2.5R

–1R

+4R (Profitable)

⚠️ Weak Market

10%

+2.5R

–1R

–6.5R (Loss)

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đź’¬ In a good market, you can win only 4 out of 10 trades and still grow your account.
💬 In a bad market, even one winner can’t save you — your batting average drops too low.

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That’s why sometimes the smartest move is to sit out, conserve capital, and wait for the next high-probability window.

đź§  The Takeaway

The market’s strength isn’t about how high it goes — it’s about how many stocks are going with it.

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When participation is narrow and internals weaken, patience pays more than chasing momentum.

đź’¬ How Did We Do?

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We’d love to hear your thoughts on this week’s alert!
Was it helpful? Did anything stand out to you? Your feedback helps us improve and keep delivering top-tier insights.

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👉 If you're enjoying your premium membership, consider leaving us a quick review — it means a lot!

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Regards,

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Valentine

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