The stock market’s relentless push higher has been supported by strong breadth & momentum. These are the 2 primary bullish factors for stocks right now.
A 50 day moving average of the NASDAQ Composite’s new high/low ratio is at its highest level in over 15 years:
Such strong breadth was only matched 3 other times over the last 40 years. Each of those 3 cases saw further stock market gains over the next 6 months, although those gains could vanish after that:
Nowhere is momentum more evident than in emerging markets right now. The MSCI Emerging Markets Index’s 20 dma increased 77 days in a row as the index broke through to an all-time high:
Such strong momentum almost always led to more gains for emerging markets over the next 3 months:
Here are some additional breadth charts.
The % of S&P 500 energy stocks above their 200 dma:
The % of S&P 500 materials stocks above their 200 dma:
The % of S&P 500 technology stocks above their 200 dma:
The % of S&P 500 financial stocks above their 200 dma:
The % of stocks all around the world that are above their 200 dma::
As I said, gobs of breadth.
- 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.
- Medium term traders should go neither long nor short.
- Short term trend followers should continue to ride the bull trend because no one knows exactly when it will end.