In a Market With Few Unambiguously Bullish Signals, Here Is One Candidate

I will share one last thought with you this weekend before the Sunday night WWIII limit down.

In looking over many things this weekend, there is of course still much uncertainty. Can we be bullish on Apple? Sure, but it has some work to do first before we can celebrate. And crypto? Yes, if it goes up from here next. And what about the S&P 500? Of course we can—if our confidence is increased by getting above the down trend line first. And so, in so many instances, we do just need to wait to see what happens next.

However, I’ve got something that I cannot interpret in any way other than fairly strongly bullishly: the advance/decline ratio. The candles are noisy and unhelpful by themselves, but when we remove that noise by focusing on an EMA (I’ve chosen the 10-day EMA here), we see what I believe is a very remarkable development. Breadth has been declining for a year, and it’s done something wonderful here since the January 24th low: it’s snapped above this down trend not once, but twice.

So here’s my thought on this: if we’re in a bear market rally, we know generally what those rallies are like. Rallies-to-be-faded are of poor quality. That is to say, they may start off with good breadth (everything gets some relief), but then they deteriorate toward the top (as components weaken and start to roll over again). But not so here: this rally was of rich quality. Strong from start to finish (in terms of breadth). And so I think this may turn into a major pivot in the market, a rally with some terrific endurance still to come.


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