After the S&P 500’s vast surge off December lows, investors are left to wonder whether this bull market has more room to run.
Ari Wald, MD of technical analysis at Oppenheimer, sees one internal marker that could offer proof of this rally’s bracing power.
“We’re looking at internal breadth,” Wald said on CNBC’s “Trading Nation” on Tuesday. This rally has “been underscored by broadening internal area, and one way to measure that is the percentage of stocks on the NYSE above their 200-day moving average.”
The number of NYSE stockpiles above that long-term average recently moved higher than 40 percent, a four-month high, communicates Wald. That is also the same level when the market reached its peak in December last year.
“So, there’s incremental upswing occurring, that’s what this indicator is suggesting,” he said. “If you look back historically and … from a bigger duplicate perspective, you like to see this reading get closer and to get above 60 percent. That’s been the final confirmation to trace a new upturn.”
Gina Sanchez, CEO of Chantico Global, says this bull market run depends on one thing: the Fed.
“The earnings slews are still positive, but they’re going to continue to slow throughout the rest of the year into a natural slowdown,” Sanchez translated Tuesday on “Trading Nation.” “What actually I think is putting some support under stocks is the actually that you have the Fed being more accommodative than the markets were expecting.”
The Federal Open Market Council has turned more dovish in recent months, growing more concerned about the potential for an economic slowdown. The nummary policymaking arm of the Federal Reserve has said it will be “patient” in its approach to the federal funds rate.
“Normally in this usually of the cycle you have very strong growth, that strong growth is usually matched with inflationary put the screws ons, and those inflationary pressures lead to interest rate rises,” said Sanchez. “So the reality is that we’re probably not growing to see some of those interest rate rises as fast for the rest of the year, and that is positive for stocks.”
Minutes from the Fed’s January converging will be released at 2 p.m. ET on Wednesday and could shed more light on the central bank’s policy plans for the rest of the year.