Where do major participation indicators sit as we open up 2026?
Looking back at 2025, the market ended with a solid year, but the path it took to get there was littered with disruptions. While headline movement grabs investor attention, understanding underlying strength often requires an unbiased look into the market’s health, which is where indicators come into play. The NDW team utilizes participation indicators to identify whether movement higher or lower is broad-based or coming at the hands of just a few names. Higher levels mean more stocks are “participating” or contributing to upward price action, which is a net positive for markets. Meanwhile, lower levels or a decrease in participation can signal weakening of strength.
Among the most sensitive metrics NDW regularly uses are the Ten Week indicators, which look at the percentage of stocks in a universe trading above their ten-week moving average. The indicator is often the first domino to fall within our participation indicators but is more prone to head fakes given its sensitivity. Looking at the Ten Week for the S&P 500 (^TWSPX), things were gradually declining entering Q4, with the indicator bottoming out at 32%, just above washed-out levels. Since then, the Ten Week has moved to the upside, currently sitting at a solid level of 64%, highlighting the rebound in breadth entering the New Year.
Due to their sensitivity, short-term indicators can signal initial change but gain more significance when confirmed by the movement of intermediate-term indicators. To evaluate intermediate-term participation, NDW uses “bullish percent” charts (BPs), which measure the percentage of stocks in a universe trading on a PnF buy signal. Looking at the Bullish Percent for S&P 500 stocks (^BPSPX), it was trending lower entering Q4 and continued lower until reaching the 38% level in late November. Since then, participation has rebounded back to solid territory, with 58% of the index on a buy signal. The current market conditions suggest stability, but a decrease to open Q1 would indicate potential weakening among large cap stocks on the intermediate-term front.
To confirm the movement of intermediate-term indicators, we compare them to the movement of long-term indicators. NDW evaluates longer-term participation with the Positive Trend indicators (PTs), which measure the percent of stocks trading in a positive trend on their PnF chart. Like the BP, the Positive Trend Percent for the S&P 500 (^PTSPX) dipped initially this quarter before reversing back into Xs around 64%, confirming the reversals higher within the Bullish Percent. Most of the market’s gains occur when PTSPX is above 50%, and readings north of 60% are generally more positive, signaling a generally healthy current market given current levels. That said, the market’s ability to maintain current levels will be a crucial factor in whether we see a strong performance from 2026 or not.
Overall, most indicators started the year off at low levels before plummeting further around liberation day. Thankfully, participation bounced back as the market rallied. Similarly, things moved lower in the third quarter before eventually reversing higher in Q4, with the market entering 2026 around solid levels. So while it was an up-and-down year for participation in 2025, things ended on a positive note.
Lastly, today’s piece focuses on S&P 500 indicators given the strength of large caps and their overweight positioning within most portfolios. However, if the market rotates away from large caps and into small and mid caps, then NYSE indicators would be a better reflection of the broader market’s health. However, with large caps continuing to sit in the driver’s seat, the SPX indicators are at the forefront of analysts' attention for the time being.
