62% of S&P 500 Is Glowing Green - 3 Trades To Catch The Wave

Publication Date: July 12, 2025

The market's technical health is flashing a vibrant green, signaling a robust underlying strength that hasn't been seen in months. A remarkable 62% of S&P 500 stocks are currently trading above their 200-day moving averages, a significant technical indicator that has reached its highest level since January. This widespread participation is a classic sign of broad market strength and often precedes or accompanies a sustained upward rally.

Understanding the 200-Day Moving Average

The 200-day moving average is a widely followed technical indicator that smooths out price data over the past 200 days to identify the long-term trend. When a significant percentage of stocks are trading above this key average, it suggests that the majority of the market is in an uptrend, indicating healthy momentum and investor confidence. This contrasts sharply with periods where only a few large-cap stocks are driving the market, which can be a sign of a less sustainable rally.

Market Context and Implications

The current breadth of the market, as indicated by the 62% figure, suggests that the rally is not concentrated in just a few sectors or mega-cap stocks. Instead, it's a broad-based advance, which historically tends to be more durable. This positive market breadth often reflects improving economic fundamentals, strong corporate earnings, or a shift in investor sentiment towards risk-on assets. For investors, this broad participation reduces the risk associated with highly concentrated portfolios and opens up opportunities across various industries.

Why This Matters for Investors

This strong technical signal provides a compelling backdrop for investors looking to capitalize on the market's momentum. It suggests that the path of least resistance for the overall market is currently upwards. While past performance is not indicative of future results, historical data often shows that periods of strong market breadth are followed by continued gains. This environment can be particularly favorable for exchange-traded funds (ETFs) like the iShares Core S&P 500 ETF (IVV), which tracks the performance of the S&P 500 index, offering diversified exposure to this broad market strength.

Actionable Insights: 3 Trades to Catch the Wave

Given this positive market outlook, here are three potential trade ideas to consider:

Core S&P 500 Exposure (IVV): For investors seeking broad market exposure, increasing allocation to a low-cost S&P 500 ETF like IVV can be a straightforward way to participate in the current rally. IVV offers diversified exposure to 500 of the largest U.S. companies, benefiting from the widespread strength across sectors.
Sector Rotation into Cyclicals: With broad market strength, cyclical sectors (e.g., industrials, financials, materials, consumer discretionary) often outperform. These sectors tend to be more sensitive to economic growth and can see increased demand as the economy strengthens. Investors could consider ETFs focused on these sectors or individual stocks within them that show strong fundamentals and technical setups.
Small-Cap and Mid-Cap Opportunities: While the S&P 500 comprises large-cap stocks, a healthy market often sees strength trickle down to smaller companies. If the broad market strength continues, small-cap and mid-cap stocks, which tend to be more volatile but offer higher growth potential, could present compelling opportunities. Investors might explore ETFs tracking the Russell 2000 or S&P MidCap 400 indices.

Risk Considerations

While the current technical picture is encouraging, investors should always be mindful of potential risks. Market corrections can occur at any time, and geopolitical events, unexpected economic data, or shifts in monetary policy could impact market sentiment. Diversification, regular portfolio review, and aligning investments with personal risk tolerance remain crucial strategies.

In conclusion, the significant percentage of S&P 500 stocks trading above their 200-day moving averages paints a very positive picture for the market's near-term trajectory. This broad-based strength provides a solid foundation for continued gains, offering various avenues for investors to participate in the ongoing rally.