Market behaviour looks increasingly bullish

Evidence continues to mount that the stock market rally has legs.

At its recent peak, the S&P 500 was 20.1 per cent above its October low. Sceptics rightly point out that the index gained an almost identical amount (18.9 per cent) last summer, only for stocks to then roll over and hit new lows. However, this rally looks different.

Firstly, it’s lasted for four months now, twice as long as the summer advance.

Secondly, it’s a much broader affair, with 78 per cent of stocks recently trading above their 200-day moving average – the highest number since September 2021, notes the Carson Group’s Ryan Detrick.

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Thirdly, trend indicators look more positive. Last summer’s rally ended abruptly after the index met resistance at its 200-day average, but it is comfortably above that level today.

Additionally, the S&P 500 has notched a golden cross, with its 50-day average crossing above its 200-day average.

Detrick found 16 previous instances where golden crosses occurred when the index was over 10 per cent below previous highs. A year later, it was higher on all but one occasion, posting average gains of 15.7 per cent.