A careful walkthrough of market trends, moving-average signals, and sector dynamics sets the stage for focused stock research. This first installment in a five-part series outlines how to “get a feel for the market” before picking stocks, using the S&P 500 as a market barometer, exploring simple moving averages, and evaluating sector performance to identify which areas show strength and which to avoid. The goal is to establish a clear, repeatable approach to research that can be applied across many investment cycles, while acknowledging that no single method is the definitive best.
Market Conditions and Trend Overview
Before diving into stock selections, it is essential to establish how the broader market is performing. In this approach, the S&P 500 serves as a proxy for overall market conditions, allowing analysts to determine whether they are moving with or against the prevailing tide. The initial step in the workflow involves charting the S&P 500 across progressively longer timeframes, and then adding a simple moving average to illuminate trend dynamics and potential turning points.
Starting with a six-month window, the trend appears generally upward, punctuated by periods of choppiness that reflect short-term volatility and recurring fluctuations in market sentiment. This framing provides a baseline for interpreting more extended horizons, where longer-term momentum becomes more informative for research planning. Extending the lookback to twelve months reinforces the impression of an overall upward trajectory, even though the path includes notable bumps and a more pronounced downturn in the autumn portion of the period. Interpreting these observations through the lens of market cycles helps, for instance, to distinguish a temporary pullback from a more sustained shift in sentiment.
When expanding the horizon to two years, the chart reveals a period of significant early volatility followed by a more steady upward drift during the latter part of the term. The measurement of this stretch shows an approximate 27% gain over the two-year span, with the caveat that the upward movement was not monotonic and included several swing points that could influence risk assessments and timing considerations. The long-run trend remains positive, suggesting that an investor profile oriented toward growth or broad-market exposure could still be aligned with the prevailing market direction, provided other indicators corroborate the stance.
Finally, a five-year view captures the impact of major macro events, including financial-crisis-era disruptions, while sustaining a long-run upward trajectory tempered by periods of stress. The overarching conclusion from these timeframes is that the market has been in a bull market phase, even though bear-market-like pullbacks have occurred along the way. This broader orientation toward growth, with occasional corrections, informs the planning of stock selection and risk controls as part of a disciplined research process.
With the market’s directional context established, the next step is to incorporate a technical overlay to identify potential momentum shifts. The plan is to apply the simple moving average (SMA) in parallel with the price data to detect crossovers that historically signal shifts in trend strength and direction. The SMA acts as a smooth representation of price activity, helping to filter out much of the noise seen in daily charts while highlighting meaningful interactions between short- and medium-term trends.
In practice, the SMA is accessed through the chart’s technical tools, and the default settings use two key moving averages: the 50-day SMA and the 150-day SMA. These two lines provide a practical balance between sensitivity and reliability, capturing intermediate-term trend dynamics without overreacting to fleeting price spikes. The interpretation is straightforward: a bearish crossover occurs when the 50-day average crosses below the 150-day average, which has historically been followed by continued downward price pressure. Conversely, a bullish crossover occurs when the 50-day average rises above the 150-day average, signaling potential continued price advances.
Historical crossovers illustrate this logic in action. A bearish crossover in June 2008 preceded a substantial decline, underlining the utility of crossovers as warning signals. A bullish crossover in late May 2009 preceded a sustained rally, reinforcing the idea that such events can align with extended uptrends. Additional crossovers during mid-2010 corresponded with broader market fluctuations, emphasizing the need to consider crossovers within the broader market context rather than as isolated signals. In more recent observations, the 50-day SMA has been diverging above the 150-day SMA, a pattern that supports a positive growth outlook and reinforces the view that the market is currently in a bullish phase.
This combination of time-frame analysis and SMA crossovers lays the groundwork for disciplined stock research, providing a framework for interpreting trend signals alongside macro-level market direction. In the next section, we shift focus to sector performance, comparing how different industry groups move relative to the overall market and to each other.
Sector Performance and Relative Strength
With the market broadly trending higher, the next step is to dissect sector performance to understand where leadership is emerging and where caution is warranted. The method involves charting all sectors against one another and then comparing their trajectories to the S&P 500 to detect relative strength or weakness. This approach helps identify sectors that are outperforming the broader market and those that may lag or underperform, guiding the allocation of attention and resources in the stock-research process.
To begin, the chart is reset to a clean slate, and the user can pull in all sectors by selecting the appropriate option to chart them simultaneously. The time horizon is set to six months to capture the most relevant momentum dynamics without losing sight of longer-term trends. Increasing the chart size and reducing visual clutter by collapsing nonessential panels helps ensure a clearer view of each sector’s trajectory and its interaction with the benchmark.
As the chart loads, one sector makes a pronounced move that stands out in a downside sense: Basic Materials. The blue performance line for Basic Materials diverges sharply toward the lower-right portion of the chart, signaling a pronounced drawdown relative to other sectors and the benchmark. This development raises an important question for analysts: should Basic Materials be removed from the current visual comparison to prevent it from distorting perception of the broader sector universe?
The practical response is twofold. First, remove the underperforming sector from the chart to create a clearer view of how the remaining sectors are performing relative to one another and to the S&P 500. Second, document the observation in the research notes to ensure the conclusion persists across subsequent review sessions and to support a data-driven decision about where to focus further analysis.
With Basic Materials excised from the chart, attention shifts to the performance of the remaining sectors. The Healthcare sector emerges as a leader, signaling relative strength in investors’ eyes and suggesting resilience in earnings or favorable demand drivers. Energy sits not far behind, reflecting its own set of fundamentals that may be tied to commodity prices, geopolitical factors, or catalysts within the energy supply chain.
To provide a coherent context, the S&P 500 is added as a baseline benchmark. This step creates a clear frame of reference for evaluating sector performance over the six-month window. The updated picture shows Healthcare and Energy outperforming the broad market, while two notable pockets of underperformance appear in Communication Services and Real Estate. This arrangement indicates that, within the current cycle, investors are gravitating toward sectors with clear growth or stability characteristics while avoiding or deprioritizing areas showing relative weakness.
The analysis extends to a shorter horizon, looking at a three-month period to confirm whether the broader trend persists. In this shorter window, the relative leadership and lag remain broadly consistent, reinforcing the initial conclusions drawn from the six-month view. A formal note is then added to the research record to capture these observations and to ensure continuity in the process as the series progresses.
From a practical standpoint, these sector signals provide guidance on risk management and idea generation. If the market atmosphere favors defensive or growth-oriented themes, sectors like Healthcare and Energy may present opportunities, while Basic Materials, Real Estate, and Communications Services may warrant a more cautious stance or even avoidance in stock selection during the current cycle. The key takeaway is to integrate sector dynamics into the screening and research workflow, rather than treating sector data as a peripheral add-on.
The takeaway from this sector analysis is clear: the market appears broadly favorable, but there are specific sectors to watch closely and potential avoidances to consider when identifying stocks. Healthcare stands out as a relative strength leader, while Basic Materials raises concern as a potential drag on a diversified sector view. This context primes the next step: using Stock Rover’s screener to pinpoint individual stocks that align with the observed sector dynamics and the broader market direction. The subsequent post in this series will dive into stock screening techniques to translate these observations into concrete research candidates.
Insights, Observations, and Practical Takeaways
The combined market and sector analysis yields several practical implications for investors engaged in a structured research process. First, the overall market appears to be in a bullish phase over multi-year horizons, as indicated by the general upward trajectory across 6-month, 1-year, 2-year, and 5-year timeframes. This context supports a bias toward opportunities with growth potential and earnings visibility, provided that risk controls remain in place to address market volatility and potential reversals.
Second, moving-average crossovers reinforce a cautious yet constructive stance. The historical pattern of bearish crossovers preceding decline events and bullish crossovers preceding uptrends reinforces the value of SMA crossovers as a signaling tool, especially when considered alongside other indicators such as trendlines, momentum, and relative strength. The current observation—the 50-day SMA diverging above the 150-day SMA—suggests continued positive momentum, aligning with the broader bull-market context while reminding us that crossovers should be interpreted within a broader framework of market conditions and sector signals.
Third, sector dynamics reveal a nuanced landscape. Leading performance by Healthcare and Energy contrasts with lagging areas such as Communication Services and Real Estate, and a notable underperformance by Basic Materials within the six-month frame. These findings have direct implications for stock selection and risk budgeting. Investors may wish to deprioritize exposure to underperforming sectors in the short term, or at least apply additional filtering to identify resilient names within those sectors if positive momentum or value catalysts arise. Conversely, leadership in Healthcare and Energy points to potential stock ideas within these areas, aligned with growth or stability themes that have demonstrated relative strength.
Fourth, the use of a chart-based workflow to compare sectors against the S&P 500 provides a practical, visual method for rapid assessment. By eliminating disruptive sectors from the chart and documenting observations in a dedicated Notes facility, research teams can maintain a clear, auditable narrative that supports later decision-making. This approach also facilitates collaboration, as team members can review the same sector signals and share interpretations without ambiguity.
Fifth, the plan to advance to stock screening is crucial for translating macro- and sector-level signals into concrete ideas. The next installment in this five-part series will demonstrate how to leverage Stock Rover’s screener to identify specific stocks that fit the observed market conditions and sector preferences. The screener serves as a bridge between broad market themes and the granular universe of individual equities, enabling a disciplined, repeatable process for uncovering candidates worth adding to watchlists or initiating research on.
As a reminder, this piece represents one approach among many investment research methodologies. It is designed to be straightforward and repeatable, emphasizing clarity, structured analysis, and a logical progression from market context to sector interpretation and finally to stock-level screening. The ultimate objective is to build a robust framework that can be adapted to different market environments and investment objectives, while maintaining consistency across the research workflow.
Roadmap for the Series and a Preview of Next Steps
This introductory installment sets the stage for the remainder of the five-part blog series, which will delve into more granular techniques and practical demonstrations that expand on the concepts introduced here. The overarching aim is to provide a practical, repeatable path from market assessment to stock-level research, with a clear emphasis on how to translate macro signals into investable ideas.
In the next post, the focus shifts to identifying specific stocks using Stock Rover’s screener. The title of that post will be Part 2 – Finding a Stock to Research. The screener will be shown as a core tool for filtering the universe of equities to highlight candidates whose fundamentals, momentum, and valuation align with the market and sector observations discussed in Part 1. The goal is to demonstrate a step-by-step workflow that goes from broad market signals to a shortlist of actionable stock ideas, ready for deeper due diligence.
Following Part 2, the series will continue with Part 3 – Researching a Company. In this segment, the emphasis will move from stock-level screening to a more in-depth company analysis, illustrating how to study corporate fundamentals, earnings drivers, competitive positioning, and growth catalysts. Part 3 will expand on the information needed to build a convincing investment case for selected names, including qualitative considerations and quantitative indicators that support a well-founded thesis.
Part 4 – Compare Against Peers will further demonstrate how to evaluate a candidate stock within its peer group, focusing on relative valuation, competitive dynamics, and performance benchmarking. The discussion will highlight how to interpret relative metrics and to adjust for industry-specific factors so that comparisons are meaningful and actionable.
Part 5 – Compare Competing Investments will conclude the series by guiding readers through an assessment of different investment options, including alternatives within the same sector or across sectors. The objective is to provide a structured framework for choosing among competing investment ideas, weighing risk, reward, and alignment with the broader market outlook established earlier in the series.
Occupying a fundamental place in the series is Stock Rover itself as a practical tool for implementing these steps. The intent is not to promote a single platform, but to illustrate how a coherent, repeatable research workflow can be executed using robust screening and analysis features, while maintaining awareness that different tools can support similar processes. The ultimate purpose is to empower readers with a clear method for navigating market data, extracting meaningful signals, and translating those signals into disciplined investment ideas.
Contributors and readers are encouraged to adapt the described approach to their own investing goals, risk tolerances, and time horizons. The five-part series aims to be a learning resource that can be tailored to individual needs, enabling investors to move from a general market feel to a precise, well-supported stock research routine. The message remains consistent: begin with a solid grasp of market direction, layer in sector context, and then apply a repeatable screening process to identify the most compelling stock ideas for further study.
Conclusion
In this opening installment, we established a structured framework for getting a feel for the market before diving into stock selections. By examining market trends across multiple time horizons using the S&P 500 as a proxy, applying key moving-average crossovers to gauge momentum, and analyzing sector performance for relative strength, we lay the groundwork for a disciplined, repeatable research process. The takeaways include recognizing a prevailing bull-market backdrop, interpreting SMA crossovers as signals within a broader context, and noting which sectors are leading or lagging on a six-month and three-month horizon. These insights inform the next steps in the series, where we will translate macro signals into concrete stock ideas using a screener. As the series progresses, the method will unfold further through company research, peer comparisons, and investment-option evaluation, always anchored in the same foundational principle: clarity, structure, and a data-informed approach to stock research.