In this post, I show that the S&P 500 is not running on fumes ā market internals are confirming the advance and the rally has healthy support.
Using the Market Internal Pressure Dashboard, this article explains why participation is improving, leadership is expanding, and volatility is normalized, giving the uptrend real staying power.
And this is why you can act with confidence ā because you understand whatās happening beyond price.
1ļøā£ What is it today?
The S&P 500 has largely repaired the damage from the March-April stress event and is trading near recent highs. However, the more interesting story is not price itself but what is happening underneath the surface.
Market internals show:
- VIX/VIX3M has moved back below 1, indicating stress normalization.
- New 52-week highs continue to outnumber new lows.
- Participation has improved materially from the breadth washout seen during the correction.
- The percentage of stocks above their SMA20 and SMA200 has recovered, but remains far from euphoric extremes.
- Leadership remains constructive rather than collapsing.
The market is behaving like a system testing whether higher prices can be accepted.
2ļøā£ Thesis
The current market environment is best described as Recovery transitioning into Acceptance.
The key observation is that volatility normalized before participation fully recovered.
Price has returned to the highs faster than breadth has returned to extremes.
This is important because it suggests the advance is not being driven by indiscriminate optimism. Instead, participation is gradually rebuilding while leadership (currently: Chips, Semis, Fabs, AI) remains intact.
The market appears to be moving from stress relief toward acceptance.
3ļøā£ What validates the thesis?
The thesis remains valid while internal conditions continue to support price:
- VIX/VIX3M remains below 1 (better below 0.9).
- New highs continue to exceed new lows with expanding leadership (other sectors joining such as SaaS and IGV recovering recently)
- Breadth (% above SMA20 and SMA200) stabilizes or improves >60%.
- Up volume continues to dominate down volume over time (effort confirming the move).
Most importantly:
The market’s internal behavior must continue to confirm the message of price.
4ļøā£ What invalidates the thesis?
The thesis weakens if price continues higher while internal participation deteriorates.
Warning signs would include:
- New highs stop expanding.
- New lows begin increasing.
- Breadth rolls over while price remains elevated.
- VIX/VIX3M starts rising back toward or above 1.
- Leadership narrows significantly (even more narrowed on the AI theme; SaaS bounce fails).
- Up volume deteriorates despite stable index levels.
A healthy market can withstand pullbacks. What matters is whether participation and leadership remain intact during those pullbacks.
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Grabbing this chart and using it will do the following for you:
1. Reduction of Uncertainty / Confusion
This chart replaces guesswork with clear evidence by showing whether participation, leadership, and volatility are improving or deteriorating. Instead of predicting price, you simply assess if the weight of internal data supports the move.
2. Reduction of Effort
The framework trains you to scan the same five recurring conditions every time ā volatility regime, participation, leadership, effort, and price confirmation. Once you recognize these patterns, decisions become faster and far more consistent.
3. Identity Reinforcement
This approach shifts your identity from a prediction-driven trader to a process-driven trader who follows evidence over opinion. You no longer tie self-worth to being right on every trade, but to consistently applying a disciplined framework.
I wish you a fruitful and confident week!