MW This isn't a 10-stock show right now. Here's where to find opportunities with the S&P 500 at all-time highs.

By Barbara Kollmeyer

Trader Simon Ree sees two ETFs leading the charge this year

As the S&P 500 logged yet another record on Wednesday, some might be wondering if we'll repeat 2024, when the index delivered a whopping 57 all-time highs.

Of course, major technology stocks and a fever for AI exposure drove much of last year's gains, and 2025 is shaping up as a slightly different story. More stocks are taking part in the upward momentum, and we've seen less powerful performances by some of the major technology names.

But it's all good, says our call of the day from trader Simon Ree, founder of Tao of Trading options academy school, who says investors aren't looking at a "10-stock show right now."

Ree has some decent calls under his belt, such as a stock rally he predicted in July 2022, or his advice for clients to "get long in April 2020."

On Wednesday, he published a series of charts on X discussing market breadth - the number of advancing stocks versus the number of declining for an index - that helps some investors figure out market trends.

While the S&P 500 SPX is currently trading at all-time highs, he notes the equal-weight S&P 500 XX:SP500EW is lagging, with only 53% of stocks trading above their 50-day moving average.

But Ree notes the advance-decline line, a breadth indicator, also hit a record high recently, suggesting "more stocks are participating in the rally than you think." And in his below chart he illustrates how crucial that 53% number is:

The percentage of stocks above their 50-day average typically peaks around 70%, meaning the laggards still have time to catch up. "Bullish, not bearish," he says.

Ree also notes what's been happening among tech stocks, with an ETF that tracks the equal-weight Nasdaq-100 QQQE outpacing the market-cap weighted QQQ, which tends to get more attention. "The Mag 7 giants are treading water as a group, while midcap tech stocks are stepping up. Breadth is growing anywhere it matters," he says.

The takeaway is that investors should not get too hung up on what the megacaps are doing, and keep watch on the breadth indicators. "Opportunity might be hiding in the midtier, not the usual suspects," he said.

In a follow-up question from MarketWatch Ree explained that a bit further, saying that stocks leading the rise in markets over the past month are constituents of ETFs like VanEck Social Sentiment BUZZ and VanEck Innovator IB 50 FFTY. Those have been "overshadowed by the Mag 7 until recently," he said.

The VanEck ETF seeks out stocks with the "highest degree of positive investor sentiment." Super Micro $(SMCI)$, Palantir $(PLTR)$, Hims & Hers Health $(HIMS)$, Ast SpaceMobile $(ASTS)$ and Meta Platforms $(META)$ are all top holdings.

The Innovator IB fund looks for companies that generate strong profit growth and sales, with wide profit margins and a high return on equity. Hims & Hers Health, GRAIL $(GRAL)$, Sprout Farmers $(SFM)$, Doximity $(DOCS)$ and Celestica (CA:CLS) are the top five holdings.

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are lower, with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y also falling. Gold (GC00) hit a fresh record, while the dollar DXY is lower.

   Key asset performance                                                Last       5d     1m      YTD     1y 
   S&P 500                                                              6144.15    1.52%  0.95%   4.46%   23.33% 
   Nasdaq Composite                                                     20,056.25  2.07%  0.23%   3.86%   28.72% 
   10-year Treasury                                                     4.517      -1.90  -12.90  -5.90   19.14 
   Gold                                                                 2963.8     0.22%  7.30%   12.29%  45.69% 
   Oil                                                                  71.93      1.01%  -4.61%  0.08%   -7.85% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Walmart will report results $(WMT)$, amid some concerns that expectations may be too high, with Hasbro $(HAS)$ also reporting ahead of the open.

Alibaba $(BABA)$ is surging after earnings beat forecasts.

Carvana stock $(CVNA)$ is down 8% after the online used-car platform reported a fall in revenue per auto.

Weekly jobless claims are due at 8:30 a.m., and will likely take on added importance after a spate of federal employee firings by the Trump administration. Federal employee claims gets reported with a one-week lag.

The Philly Fed manufacturing index will be released at the same time, followed by leading indicators at 10 a.m. Chicago Fed Pres. Austan Goolsbee is due to speak at 9:35 a.m. and Fed Vice Chair for Supervision Michael Barr later in the day.

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The chart

This chart from Goldman Sachs shows where large-cap mutual-fund managers put their money in the fourth quarter, and these investors were more overweight financials than any time over the last 10 years. So banks and capital-markets stocks like Wells Fargo $(WFC)$ and Mastercard $(MA)$ were among the most popular. These investors remain underweight Mag 7 stocks, says a team led by Ryan Hammond, who notes that 51% of large-cap active mutual funds are beating their benchmarks year to date, against a historical average of 37%.

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   NVDA    Nvidia 
   BABA    Alibaba 
   TSLA    Tesla 
   PLTR    Palantir Technologies 
   SMCI    Super Micro Computer 
   GME     GameStop 
   TSM     Taiwan Semiconductor Manufacturing 
   MSFT    Microsoft 
   AAPL    Apple 
   QBTS    D-Wave Quantum 

Random reads

California homeowner returns after fires to Yogi-the-bear squatter.

Hummingbirds may not be loners after all.

-Barbara Kollmeyer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 20, 2025 06:42 ET (11:42 GMT)

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