If you've been reading our content for any length of time, you've seen the chart above. This is the Value Line Geometric Average. You will - hopefully - recall that the Value Line is a much better measurement of the United States stock market for two main reasons:
- The S&P 500 - logically - only captures the performance of about 500 stocks. (Technically, there are 503 stocks in this index right now.) The Value Line Geometric Average captures almost 1,700 stocks; so more than three times as many.
- The S&P 500 is "Cap-Weighted" meaning the top stocks in the index really control the index. The vast majority of the stocks in that index have very little influence. The Value Line, however, is "Equal-Weighted" meaning every stock has just as much or as little influence as the next one.
For those two reasons, we tend to look at the Value Line to get a more accurate reading of the health of the U.S. stock market. Right now, well for some time now, the Value Line isn't giving much encouraging news.
Here's the quick run down:
- The Value Line was basically flat for 2025. The conclusion, in 2025 the average stock under-performed a decent money market fund.
- At the end of 2025, we expected the Value Line to break out and finally advance. It did just that ... for two months.
- Once the War with Iran started the Value Line broke down - like everything - and ultimately made a low on March 30th.
Since that low was put in on March 30th, just about everything has rallied. But the bifurcation has returned.
Take a look at this chart:
This is the daily candle chart for the NASDAQ and, as you can see, it ripped roared higher after that March 30th low. The last two sessions, we've seen a little bit of a pause, but that was also expected given the reading on the RSI (bottom panel).
Now compare this chart of the NASDAQ to the Value Line. We could argue that the NASDAQ is pausing after getting over-extended. But the Value Line appears to be breaking down, putting in new short-term lows.
That's not good news and it's a sign of the extreme bifurcation of this market. Don't let the main indices deceive you: risk abounds.
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