The bullish trend remains intact. Major indexes advanced again in August, with the S&P 500 holding firmly above its uptrend line and key moving averages. Even when the index briefly dipped below the 20-day moving average in early August, it quickly recovered, reinforcing that support level and keeping the short-term outlook bullish.
Risk-on sectors and industry groups continue to lead the market, confirming investor appetite for growth and risk-taking. While market breadth has been uneven at times, the broader weight of technical evidence remains positive. Most indicators point to a healthy market environment, and participation is beginning to improve again.
Overall, the market is strong across short, intermediate, and long-term time frames. As long as the index remains above its key support levels, the bullish thesis remains in play.
S&P 500 Index – Uptrend Remains Intact
This chart covers the past eight months, beginning with the February 2025 market peak, the sharp correction that followed, and the subsequent bullish advance. The index remains in a well-defined uptrend, supported by a trendline. As of now, the S&P 500 continues to trade above this trendline, underscoring the strength of the current advance.
The index is also holding above its 20-day simple moving average, which has acted as reliable support. The only violation occurred in early August, but the index quickly regained that level the following day. This swift recovery reinforces the bullish tone of the market.
All of the major moving averages remain in bullish alignment, with shorter-term averages above longer-term averages. With the index above both its short-term moving averages and its rising trendline, the overall technical picture remains bullish.
Risk-On Leadership Remains Strong
The second chart highlights relative strength comparisons of five risk-on sectors and groups: , Nasdaq 100, , , and . Each is compared against the , which is considered a defensive, risk-off area. The S&P 500 Index is shown in the upper panel for context.
All five of these risk-on areas have been trending higher since the April bottom, confirming a market environment that favors growth and risk-taking. This alignment is consistent with a healthy, bullish market backdrop.
The one outlier has been Software, which initially advanced with the others but broke its uptrend in late July. I have drawn a red line to highlight this short-term pullback. Encouragingly, the Software relative strength line has since rebounded above that red line, suggesting its weakness may have run its course.
Taken together, the leadership from these risk-on groups provides strong confirmation of a risk-on environment, which supports and validates our broader bullish thesis.
Market Breadth – A Key Indicator to Watch
The top panel shows the S&P 500 Index, while the lower panel tracks the percentage of stocks within the index trading above their 50-day simple moving averages. Over the past two months, this breadth line has been forming a wedge pattern, with three declining peaks since early July. I’ve marked this with a red declining line that highlights the narrowing participation. This indicates that, while the index has been advancing, fewer individual stocks have been keeping pace.
In early August, the breadth line bottomed and has since turned up. It is now testing the red declining line, and whether it can break above this level will be telling. A continued move higher would be bullish, signaling that the rally is broadening out across more stocks. On the other hand, if the breadth line rolls over and falls below the shorter-term green support line, it would suggest that participation remains stagnant.
At this point, most technical indicators across the market remain positive, so weaker breadth on its own does not signal an imminent correction. Still, this is an important factor to monitor, since broader participation would add conviction to the current market advance.
Client Account Update
Client accounts remain positioned to capitalize on the current bullish market environment. While we are fully participating in the strength of this advance, we are also maintaining some cash on the sidelines. This gives us the flexibility to add exposure strategically as new opportunities present themselves.
We plan to put this cash to work in select stocks that combine strong fundamentals with relative strength, entering at points where the risk-to-reward relationship is clearly in our favor. This disciplined approach ensures we continue to benefit from the bullish market while managing risk and focusing on the highest quality opportunities.