SPY Holds Stage 2 as Breadth FadesState Street SPDR S&P 500 ETFBATS:SPYAlphaMethodXSPY continues to trade above a rising 150-day SMA, a daily approximation of Weinstein’s 30-week moving average. Nearly half of the stocks in the market universe are also still advancing, but participation has started to shift. Stage 2 participation currently stands at 48.6%. That is still a strong reading, but it peaked near 55% in mid-July and has been trending lower. Stage 3 (Topping) has risen to 21.0%, its highest level since early spring. Stage 4 (Declining) has turned higher from its summer lows and now represents 18.4% of the universe. Stage 1 (Basing) is only 12.0%, leaving a relatively small group of stocks currently positioned to rotate into Stage 2. The comparison with March is important. At that point, Stage 4 was near 40% while Stage 2 was around 43%. Over the following months, stocks steadily rotated forward through the price cycle: Stage 4 contracted while Stage 2 expanded toward 55%. That process has now started moving in the opposite direction. This is not a broadly bearish signal. SPY remains above a rising 30-week MA proxy, and nearly half the market remains in Stage 2. What has changed is the direction of participation. If Stage 2 continues to contract while Stages 3 and 4 expand, fewer stocks will be participating in the advance even if SPY remains relatively strong. For now: healthy participation, but weakening beneath the surface.