BRK.B & Clusters of Strong Breadth
Should we continue to trust it?
Good morning - I wanted to share two pieces of content this morning.
First, here’s a CNBC interview I did early yesterday morning:
And an excerpt from this morning’s Opening Look note:
Back-to-Back 80% Days
As noted above, the SPX had 83% of stocks advancing yesterday, marking the second straight 80% session. Given how many strong days we’ve seen since the April lows, consecutive 80% days might not seem like a big deal at first glance.
However, after reviewing our breadth stats, we found that the last time this happened was way back on April 11 and April 14. As we know, that was at the very start of the comeback, when trading was still raucous and volatility was intense.
I posted this chart on X after the close and, as usual, the responses were colorful — both bullish and bearish. Recently, I’ve noticed people asking Grok to interpret some of my posts. It happened again yesterday, with someone asking what followed past occurrences.
I can’t confirm these facts (and I’m sure there were others before these), but this was Grok’s response:
“Back-to-back 80% breadth days (≥80% advancing SPX stocks) are rare bullish signals, often after weakness. After April 11-14, 2025, SPX rose ~20% in 4 months post-crash recovery. In Nov 2024, it preceded short-term gains but later volatility. In Sep 2023, a dip followed, then +7% by year-end and more. Overall, they tend to herald strength, though not without risks.”
Notably, those past occurrences all happened after volatile, bearish periods — including the last one in April. That’s not the case now, with the SPX up more than 30% from its lows and making new highs.
So, what does this tell us? One interpretation is that this market is very different, with momentum not just holding but expanding. While Tuesday’s session was growth-led, yesterday was the opposite: Tech had the worst breadth, with the XLK Technology ETF up a mere four basis points. It’s rare to see the SPX gain 32 bps with 80% of components up.
As a result, the RSP Equal-Weight S&P 500 ETF outperformed the SPX by more than 1%. While AI, meme stocks, and speculative names often get the “blame” for the comeback, this has truly been an everything rally.
The concern here is that things can’t keep improving without at least some back-and-forth movement.
Jared Dillian of The Daily Dirtnap reminded jubilant bulls last night:
Jared is a master of sentiment trading and has called major turning points throughout his career. But even he admits he’s frequently early on pivots. Regardless, his point stands: eventually, the perfect backdrop won’t be perfect anymore.
We’re not here to call tops or bottoms, but to identify when things are changing — with patterns always as our primary gauge. So, far bullish patterns have continued to work.