Here is why many get the stock screening wrong
S&P 500 SP_DLY:SPX
The market shows healthy breadth and quite a few sector ETFs are in positive momentum/trend.
Yet this information is incomplete—and it still does not tell you where you should put your money. Here’s why.
1️⃣ What do we observe?
- SPX is in Acceptance.
- NDX is moving from Recovery toward Acceptance.
- Breadth is healthy. Volatility is normalized. Participation supports price.
- TradeSentinel absolute sector view show strength across Technology, Financials, Industrials, Healthcare, Materials and parts of Energy.
Risk-on. Broadening participation. Plenty of sectors look healthy.
2️⃣ But that conclusion is incomplete.
Absolute charts answer: “What is going up?”
They do not answer: “What is actually outperforming the market?”
And that difference matters. A sector can have rising moving averages, positive momentum and a perfectly healthy chart and still underperform SPY.
3️⃣ This is where the ratio view changes the picture.
Once sectors are measured against SPY, the broad strength becomes much more selective.
- Software and Financials stand out more clearly.
- Small caps and equal-weight Nasdaq are improving.
- Technology remains structurally strong.
That is the “aha” moment: A sector can be bullish and still be the wrong place to be long.
4️⃣ What does this change for a trader?
Two things:
Holdings:
You may keep owning something because it is “still going up” while capital has already moved somewhere stronger.
Screening:
You may spend time looking for stocks in a healthy sector that is actually losing the relative-strength battle.
That is hidden opportunity cost—and hidden portfolio risk.
The framework changes the question from:
“What is trending up?”
to:
“What is trending up, improving, and outperforming?”
That is the difference between simply participating in a (bull) market and being positioned where the market is actually rewarding capital.
