Stock Market Trend and Momentum

By LaRue Gibson on October 13, 2025

The measurement of trend and momentum determines a benchmark stock index’s breadth. But why does market breadth matter?

Indexes can rise even if only a few large companies perform well. Market breadth measures the true health of a stock index and the market. To judge market health beyond headlines, we monitor how many index member companies trade above key moving averages. When most constituents (>50%) trade above a long-term moving average, we consider the market trend positive. When most constituents (>50%) trade above an intermediate-term moving average , we know momentum is strong. When market benchmark indexes demonstrate both trend and momentum, history indicates that the market trend will continue with persistence. Of course, past performance does not guarantee future results, but data indicate a high probability of the market trend continuing. We use the 50-Day moving average and the 250-Day moving average.

In this document we offer these two readings on a simple matrix with trend on the X-axis and momentum on the Y-axis. The upper-right quadrant reflects broad and powerful advances; the lower-left flags periods when rallies narrow or falter. This approach aligns with long-standing technician practice and institutional breadth work and is grounded in research on how investors anchor to long-term averages.

This visual market health matrix allows investors to ascertains if market strength is concentrated or truly widespread—and adjust risk positioning with a clear, rules-based context.

Defining Moving Averages

• Moving averages are a fundamental tool in stock charting that help smooth out price data over time. They provide a clearer picture of a stock’s overall direction by averaging past prices into a single continuous line.
• The Simple Moving Average (SMA) is calculated by adding the closing prices of a stock over a defined period and dividing by the number of periods. Each day within that period carries the same weight. For example, a 10-day SMA adds the last 10 days of closing prices and divides by 10, producing a rolling average that updates daily.
• The Exponential Moving Average (EMA) uses the same principle but gives greater weight to more recent prices. Because of this weighting, the EMA reacts more quickly to price changes, making it especially useful for tracking current momentum while still smoothing out random short-term fluctuations.

The above Trend and Momentum Matrix illustrates the current health of 15 major United States and International benchmark indexes.

The United States’ bourses lost momentum this week. The smaller capitalization indexes also fell into down trends. We will watch this turn in events closely as the weak seasonal backdrop gives way to the most positive time of year for market performance.

We invite your questions, thoughts, and comments. Take good care.

Be patient while the market’s trend and momentum resolve more clearly.

LRG Wealth Advisors

(646) 434-3133

LRGWealthAdvisors@HightowerAdvisors.com

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