Perfection is the Enemy

The $SPY ( ▲ 0.5% ) S&P 500 and $QQQ ( ▲ 0.34% ) Nasdaq 100 just pushed to new all-time highs.

Let that sink in.

Through war headlines, rate fears, AI bubbles, and the national debt crisis…

Stocks are trading at the highest prices in history.

This is what markets do. They move forward.

And price action is the clearest truth we have to assess the real story.

Now? We look for confirmation.

We trust price. But we don’t operate blind.

We look for supporting evidence from tools that give context to the move:

• Is breadth improving or deteriorating?

• Are momentum and risk ratios aligned?

• Are more areas participating, or just a few names doing the heavy lifting?

But here’s the line too many cross: they move from confirmation to perfectionism.

“Well Larry, small caps haven’t broken out.”
“Transports are still lagging.”
“Rates are elevated.”
“Some sectors look extended…”

That’s the trap. Waiting for perfection.
It feels like risk management - but really, it’s fear in disguise.

New highs are the most bullish thing a market can do.

Because by the time every box is checked, every ratio aligned, and every sector behaving, stocks are already up another 10-20%.

The best market participants use confirmation as a tool, not a crutch.
They manage risk. They stay flexible.
But they understand this simple truth:

You can’t profit from moves you’re not in.

By my read, there's plenty of confirmation to enjoy this ride.

Let’s get into it.

If you asked a technician what sectors they want leading to new highs, the answer is simple: the economically sensitive ones.

The “risk-on” areas. The parts of the market that do well when growth is alive and liquidity is flowing.

And that’s exactly what we’ve got.

• $XLC ( ▲ 1.17% ) – Communication Services: New highs, breaking through overhead resistance.

  

• $XLI ( ▲ 1.0% ) – Industrials: Fresh breakout to new highs.

  

• $XLK ( ▼ 0.12% ) – Technology: The heavyweight champ clearing resistance with strong RSI and relative strength.

  

• $XLF ( ▲ 0.29% ) – Financials: Quietly sitting right below new highs.

  
  

  

Not only are these the “right” sectors to lead.

They’re the most important sectors in terms of market cap.

The six strongest sectors right now account for 73% of the S&P 500’s weight.

That’s not narrow leadership. That’s confirmation.

Sure, you’d like to see Discretionary $XLY ( ▲ 1.67% ) leading too.

And while it’s not at new highs yet, it’s above the 200-day, reclaimed the all-time high VWAP, and it just made a 1-month high.

That’s not weakness. That’s setup that looks ready to follow the leaders.

We’re also seeing confirmation beneath the surface.

One of our simplest but most powerful tools is the New Highs minus New Lows line.

We want to see more stocks breaking out than breaking down. Right now?

That’s exactly what’s happening.

• Net New Highs in the S&P 500 just posted their strongest reading since March.

• Breakdowns are drying up while breakouts are starting to expand.

  

  Breakouts Working & Breakouts Failing

That’s confirmation. Don’t overcomplicate it.

Let’s talk about risk appetite.

The $SPHB ( ▲ 0.39% ) vs. $SPLV ( ▲ 0.33% ) ratio is pushing all-time highs.

This is your classic High Beta vs. Low Volatility signal - textbook “risk-on.”

If you want a clean read on whether investors are embracing volatility and growth vs. hiding in safety, this is it.

And it’s not alone.

Even the laggards are shaping up:

• $RSPD ( 0.0% ) vs. $RSPS ( 0.0% ) (Equal Weight Discretionary vs. Staples) looks great. If this breaks higher, it adds even more fuel to the fire.

  And remember, this is equal weight, so no mega-cap distortion.

  

  Equal Weight Also Signaling Risk On

We’ve got participation.

We’ve got aggression.

That’s what I call….confirmation.

Ok - let’s put the nail in the coffin.

Look at the Equal Weight SPDR Sector ETFs.

Stripping out cap-weight bias gives us a clean read on broad participation.

One again, very offensive sectors leading.

This is not a market cap story - it’s simply a stock market story.

And finally, look at $EQAL ( ▲ 0.65% ) – the Equal Weight Russell 1000.

It covers over 90% of the U.S. equity market cap, and while it isn’t at new highs yet, it’s clearly turned the corner.

Back above the 200-day. Back above AVWAP. Base breakout forming.

It doesn’t look weak - it looks like a follower that’s about to join the leaders.

You respect it.

Because if you’re waiting for every ratio to scream “buy,” you’re already late.

The conditions we’re seeing now?

They’re how real bull markets behave. Not perfect. Just powerful.

We don’t need everything. We just need enough.

And from where I sit? There’s more than enough confirmation to stay long and strong.

This was my best show yet. Hands down.
I’m seeing the board clearly right now.

If you get the chance, I highly recommend giving this one a watch.
Put it on 1.5x speed and let it rip.

Drop a comment and let me know what confirmation tools you’re using.
Always curious how others are reading the tape.

Please give the video a thumbs up if you find it helpful.

It’s the best way to show support.

Cheers,

Larry Thompson, CMT CPA

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