A fresh record high could be in the offing soon after two signals flashed in the stock market’s favor this week. Ed Clissold, chief U.S. strategist at Ned Davis Research, pointed out that the S & P 500 experienced a so-called breadth thrust this week, when more than 90% of the stocks in the benchmark broke above their 10-day moving averages on Monday. It was the second time this month that happened. “The beginning of major moves is often marked by breadth thrusts, or an extremely high percentage of stocks rallying together,” wrote Clissold. “The strongest rallies tend to occur when most stocks participate. The rationale is that if a few stocks run into trouble, others can propel the popular averages higher.” The S & P 500 on Monday soared nearly 1% and completed an eight-session winning streak — its longest since November. On Thursday, the broad market index traded less than 1% below a record set in July. .SPX 1M mountain SPX 1-mo chart Another sign that stocks could rise to a record soon comes from the bond market. Clissold pointed out that the benchmark 10-year Treasury note yield fell to its lowest level in more than a year on Wednesday. That happened after the release of U.S. jobs data revisions reinforced expectations of lower Fed rates. “The recent drop in yields has been a timely development for equity investors because it has triggered several bullish signals from interest rate indicators and avoided bearish readings in others,” Clissold said. “Along with the technical backdrop, likely soft landing, and modest earnings acceleration, falling rates are another check in the bulls’ favor.” To be sure, Fed Chair Jerome Powell’s speech in Jackson Hole, Wyoming on Friday could upend the positive vibes recently felt in the market.
The stock market this week got 2 bullish signals as S&P 500 creeped back toward record highs
Aug 22, 2024
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