📈 Broad-Based Buying

What happened on Friday was telling.

Market Breadth Improving

Understanding market breadth is critical to knowing whether the market is making a sustainable move higher, or if it a simple short-term bounce.

Below is a chart of the S&P 500 overlaid with the percent of stocks above their 5 (S5FD), 20 (S5TW), 50 (S5FI), and 200 (S5TH) moving average.

You can see that we washed out initially on the day of the Fed meeting when Powell’s speech brought significant fear into the market which caused massive selling.

Since then, we bounced quickly, retested lows, and are now starting to bounce again.

This is a bullish sign. I also like how we are building slowly this time as opposed to the rapid bounce we had following the sell-off.

We also still have significant room to go before the percent of stocks above their moving averages reaches overbought levels.

Another way of visualizing this is by looking at a chart comparing the percent of stocks above their 20-day moving average by the percent of stocks above their 5-day moving average.

Again you can clearly see that we reached bottoming levels in green. When you correspond this with the S&P 500 (below in red) you can see that this leads to short-term bottoms in the market.

This is a good sign for the market.

Stocks to Watch

There are a number of names that are setting up now that I am interested in getting involved in.

Watch this weekend’s video to see the names I am targeting as there are several key themes in the market that are showing significant relative strength.