Bad Breadth | Trendlines Over Headlines with Todd Sohn

Key Takeaways

• Monitor the Equal Weight S&P 500 (RSP) and Vanguard Extended Market ETF (VXF) as health indicators—if these decline while mega-cap stocks break out above 4,325, it signals durability issues in the rally and concentration risk.
• The S&P 500 breaking its 12-month streak of negative year-over-year returns in April historically leads to positive forward returns 9 out of 10 times with ~12.6% average gains, supporting (but not guaranteeing) upside probability over the next year.
• Energy sector is likely in a multi-year consolidation phase after doubling its S&P weight from 2020-2022; historical precedent suggests sectors that double weight take the next year off, making tactical outflows from XLE a contrarian positive despite negative price action.
• JPMorgan's $400B market cap alone exceeds the entire KRE regional bank ETF (~$140B); monitor KRE volume patterns—declining volume on lower prices suggests institutional capitulation and potential bottom formation, similar to 2009 XLF lows.
• Gold's lack of aggressive ETF inflows despite testing multi-year highs is a positive contrarian signal; a stronger dollar rally would pressure gold, but dollar weakness should trigger breakout confirmation—currently worth a portfolio allocation slice for recession protection and equity portfolio diversification.