The U.S. stock market rebounded sharply after a quick pullback. The NASDAQ Composite’s Up Issues ratio (% of stocks that went up on that day) exceeded 74% for 2 days in a row.
Historically, these breadth thrusts could lead to choppy short term trading. But after that, it almost always led to more gains over the next 3-12 months. More importantly, in the past few years this marked some major medium term bottoms:
One important thing to note here is that almost all the historical cases occurred within a bull market. So take this bullish stat with a grain of salt.
Energy prices have rallied after a horrendous collapse last March. The ongoing rally pushed gasoline’s Daily Sentiment Index to the highest level since 2019:
Historically, such elevated sentiment could lead to a quick pullback in crude oil prices over the next month:
- Short term trend followers should continue to ride the bull trend because no one knows exactly when it will end.
- Medium term traders should go neither long nor short.
- Long term investors should be highly defensive right now. This speculative bull market may last another 6 months or even 9 months, but in 2 years time, long term investors will be glad they did not buy today.