7,000: Green, Yellow or Red Light for Stocks?

7,000 is an interesting point of resistance for the stock market.

Yes, we have flirted with that level since the calendar flipped over to 2026. Even touched it briefly on January 28 before retreating.

So let's spend a little time considering if 7,000 is a green, yellow or red light for stocks at this time and what that means for our investment plan going forward. 

Market Commentary

Let’s not waste any time doubting that we are in a bull market.

• Economy is strong
• Another impressive earnings season is brewing right now
• Kevin Warsh is lined up as the next Fed Chair. As certain as “Death and Taxes” he is being put into that position to quickly lower rates which is a great catalyst for subsequent growth and equity upside.

The main issue continues to be one of valuation as shared with you all a number of times using this chart showing the PE by market cap:

The best news about this chart is the recent downward trajectory of PE’s for Large (red) and Mega caps (pink). And at the same time small (green) and mid caps (blue) are heading higher.

This is PRECISELY what I was pounding the table about all of 2025 and why the smaller stocks should be overweighted. Indeed, that investment plan has been paying off handsomely since August 2025 with smaller stocks strongly outperforming.

That party hit the accelerator in January which explains the +12.1% gain for the Zen Investor portfolio year to date...more than 10 fold ahead of the S&P 500.

The most interesting curiosity at the moment is about 7,000. It is a green, yellow or red light for the stock market?

Clearly year to date it has been a red light. But not so bright red as to scare investors off the scent of trying to break above.

My gut tells me that we will consolidate around this level for a while. Let’s call that a yellow light in the near term...but green light in the long term.

Meaning that investors will want to stay bullish given the positive conditions for stocks shared in the bullets higher up. So, they will likely not sell off that heavily unless there is something seriously scary to consider (nothing currently comes to mind).

But again, the 7,000 contemplation is really only about large caps and the Mag 7. Given the valuation equation shared above, they should continue being laggards while small and mid caps keep their recent lead.

Even from current levels, these smaller stocks would have to rally 37% from current levels to reach the same 22 PE of their large cap peers. That won’t happen overnight, but does provide a BRIGHT GREEN LIGHT for smaller stocks over the next few years.

Again, this explains why it is the centerpiece of my investment plan to outperform. The secondary aspect is to lean into industries that benefit from lower rates (auto, housing, industrials etc).

I know this next part is repetitive...but it is worth repeating.

Our goal is not to buy the average smaller stock. We want those with the healthiest fundamentals trading at attractive prices. PRECISELY what the Zen Ratings was built to uncover.

Which of these top Zen Ratings stocks are my favorites? Read on for more…

What To Do Next?

Discover my Zen Investor portfolio that relies upon my 45 years of investing experience. 

During that time I have learned vital lessons from 7 bear markets…8 bull markets and just about everything else the “Mr. Market” can throw at us. 

I use this knowledge to create a detailed investment plan. Then lean into our proven Zen Ratings quant model to select the best stocks given their average annual return of +32.52%. 

In total the Zen Investor portfolio now has 20 top stocks that are hand picked for today’s unique market landscape. 

Plus 2 new stocks I just added in early February with stellar upside potential. 

If you are curious to learn more, and want to see my current top 20 stocks, then please click the link below to get started now. 

Discover the Zen Investor & Top 20 Stocks >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)

Editor of the Zen Investor

Want to get in touch? Email us at news@wallstreetzen.com.