The Tell: Why the U.S. stock rally looks more like a new bull market than a bear bounce to these analysts

by | Aug 3, 2022 | Stock Market

Broader is better when it comes to the stock market rally and some analysts see technical signs that gains may be signaling the end of the 2022 bear market, though it’s too early to say for sure. “The risk that the recent advance is merely a bear market rally has not been eliminated. But…the technical improvement up to this point is more akin to a new cyclical bull market than a bear market rally,” said Ed Clissold and Thanh Nguyen of Ned Davis Research, in a Tuesday note.

Technical analysts pay close attention to various measures of market breadth — or how many stocks are participating in a move up or down. Clissold and Nguyen noted that the rally that followed Federal Reserve Chair Jerome Powell’s July 27 news conference produced a pair of rare “breadth thrust” signals: first, the percentage of stocks hitting 20-day new highs rose above 55% for the first time since June 2020; second, the ratio of 10-day advances to 10-day declines rose to 1.9 for the first time since 2021. The moves came after a 10:1 up day for S&P 500 stocks earlier in July.

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