Earlier this week, we examined rolling 3-year excess returns for the S&P 500 cap-weighted index versus its equal-weight counterpart, tracing the relationship back to the early 1990s. Our analysis highlighted that the current level of excess returns is approaching highs not seen in nearly 25 years, a significant historical marker that underscores the dominance of large-cap stocks in recent years. (Click here to read the full piece.)

But this raises two critical questions: How strong are these excess returns? And what do periods of pronounced outperformance historically signal about the market’s future trajectory?

To explore this, we focused on a specific short-term phenomenon: consecutive days where the S&P 500 cap-weighted index outperforms the equal-weight index by more than 0.5%. This past Wednesday marked the second straight day of such outperformance, with Tuesday and Wednesday posting excess returns of 1.44% and 1.10%, respectively. These are not trivial moves—they suggest concentrated strength in mega-cap names, which often drives broader market movements.

Historical Context

We isolated all historical instances of two consecutive days of >0.5% excess returns since 1990, while removing clusters that occurred within two weeks of each other to avoid skewing results. After filtering, we identified 40 distinct occurrences over the past three decades. The forward performance following these signals has been compelling:

These figures point to a strong bullish bias following such streaks, reinforcing the idea that streaks in favor of large companies often precedes favorable market conditions. The chart below highlights all the instances in which this excess return streak has occurred, with the last few years contributing significantly to the total streak amount.

Taking It a Step Further

Given the magnitude of this week’s excess returns (>1% on both days), we examined whether more extreme signals carry additional predictive power. We found five instances since 1990 where two consecutive days each exceeded 1% in excess return. The results were similarly impressive:

While the sample size is small, the magnitude of positive forward returns suggests that these rare events often precede periods of strong momentum and investor confidence.

Implications for Asset Allocation

This week’s outsized excess returns, each surpassing 1%, are signals embedded in a broader narrative of market leadership and momentum. When viewed through the lens of historical precedent, these rare streaks have consistently preceded strong forward returns, suggesting that concentrated strength in mega-cap stocks act as a precursor to broader market rallies. For asset allocation, this underscores the value of staying attuned to market leadership trends. The benefit of using a momentum-driven approach is adaptability: if leadership begins to shift or weakness emerges, the indicators and tools on the site will reflect that change promptly, allowing for timely adjustments.

Whether earnings related, geopolitical, or other external factors, several notable S&P 500 stocks saw violations of key support levels, all while the broader market index (SPX) rallied to a new all-time high. While indicators have shown a decrease in broader participation as the market moves to new highs, this week’s action has proven more significant for some names. This is by no means a comprehensive list of stocks that have violated key support or seen divergences in technical picture. But it will provide examples of noteworthy chart action for similar positions that could require an evaluation, whether it be lightening up exposure (depending on cost basis) or simply keeping a closer eye on the stock. All the names highlighted are stocks still maintain acceptable technical attribute ratings and further downside in the near-term could impact their TA ratings, potentially leading to additional action required. With the number of positions covered and, to keep commentary concise, the focus of each stock will be technical in nature.

Meta Platforms (META) – Internet – Thursday’s action (10/30) saw META fall from the mid $750s on the point and figure chart to $656, marking its lowest level since the beginning of June. The stock broke a double bottom at $696 to return to a sell signal but also violated notable support at that same price level along with additional support at $680. The magnitude of downside for META during Thursday’s trading caused the Peer RS chart to reverse to a column of Os, dropping the stock to a 4 TA rating. The Market RS chart now resides within one box of reversing down into Os as well, leaving an additional technical attribute at risk in the near-term. Support on the default chart now lies at $624 before getting to the April low and bullish support line at $480. On the more sensitive 4 point per box chart of META, support can be found between the aforementioned default chart support levels around $590.

Automatic Data Processing (ADP) – Business Products - Action Wednesday (10/29) brought ADP down to $264 on the default point and figure chart, taking out the April 2025 low at $276 and bringing shares to their lowest level since July 2024. This follows the stock moving into a negative trend during the middle of October, which dropped the stock down to a 3 for 5’er. An additional technical attribute is at risk, as ADP now resides within one box of reversing down into a column of Os on the Peer RS chart. Support for the stock now resides in the $228 to $232 range, while support close to current trading levels can be found on the more sensitive 2 point per box chart in the upper $250 range.

Darden Restaurants (DRI) – Restaurants - Action Wednesday (10/29) brought DRI down to new 2025 chart low at $178 on the default point and figure chart, marking a third sell signal with the double bottom break at $180 in the process. After improving to a 5 TA rating during the summer, DRI moved into a negative trend on the trend chart and saw its market RS chart reverse down to Os in mid-September. DRI still maintains a 3 TA rating, but the stock has seen its Peer RS chart diverge in the near-term and DRI now lies in the bottom quartile of the Restaurants sector matrix. Support on the default chart now lies in the mid-$150 to $160 range, while additional can be found around $140.

Royal Caribbean Cruise (RCL) – Leisure - Action Tuesday (10/28) brought RCL back to a sell signal and violated support at $300 as shares fell to the mid $280s. The breakdown led to a reversal into Os on the peer and market RS charts following Tuesday and Wednesday’s action, bringing the stock down to a 3 for 5’er. RCL has also now fallen into the bottom half of the Leisure sector matrix after having ranked in the top half for the more than the last three years. Prior resistance on the default chart in the mid-$270 range may be seen as near-term support, while additional can be found in the lower to mid-$250 range with the bullish support line sitting at $252.

D.R. Horton (DHI) – Building - Action Tuesday (10/28) brought DHI back to a sell signal with a triple bottom break at $148 and violated the bullish support line. Coupled with the market RS Chart reversal into Os earlier in October, the shift to a negative trend on the point and figure chart drops DHI down to a 3 for 5’er. DHI has also now fallen into the bottom half of the Building sector matrix and resides within one box of reversing into Os on its Peer RS Chart, leaving a technical attribute at risk in the near-term. Support on the default chart now lies at $142, while additional can be found at $130.

Waste Management (WM) - Waste Management - Action Tuesday (10/28) brought WM below $198 to mark a new 2025 chart low and test notable support dating back to June 2024. Prior to this week’s action, WM returned to a sell signal in September and violated support in the mid $210s in mid-October. With the dip below support at $200, WM reversed into Os on the Peer RS chart, dropping the stock down to a 3 for 5’er. Beyond current chart levels, support for WM on the default point and figure chart is not found until $180, the bullish support line, while support on the more sensitive 1 point per box chart can be found in the mid $180s.

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