Technical Assessment: Bullish in the Intermediate-Term

Argus

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Feb 20, 2025

Summary

Price volatility for the major indices remains very low. The S&P 500 (SPX), Nasdaq, Nasdaq 100, S&P 100, and the Invesco S&P 500 Top 50 (XLG) are starting to feel like short-term markets that just want to crawl quietly higher. But the dispersion of returns within the SPX is mind blowing. For many, this is a great reason to have a well-diversified portfolio made up of major index ETFs, with a smattering of individual stocks that each represent, at most, 5% of your portfolio. A large position in an individual stock can blow up a portfolio and take many years to repair. A 30% loss in a stock requires a 60% gain in that stock or another stock to break even. Finance classes teach the efficient-market hypothesis (EMH), which suggests it's not possible to beat the market consistently. That has some credence, as few investors regularly beat the S&P 500 year after year. However, the EMH goes on to say that you can't beat the market consistently because all available information is reflected in current stock prices. The last point is where we wave a red flag. The dispersion of 2025 returns for the SPX issues (and in many other years) is so wide