Dealers work on the floor at the New York Stock Exchange, June 5, 2019.
Brendan McDermid | Reuters
More individual stocks are smashing new highs, and that often bodes well for further market gains.
According to Sentiment Trader, just around a year ago about 40% of stocks listed on the NYSE and Nasdaq hit new 52-week lows. Last week, as key market guides continued to hit new highs, a net 7% of NYSE and Nasdaq stocks made new 52-week highs, the most in six months.
CNBC statistics shows that for every stock hitting a new low on the Nasdaq Monday there were nine setting new highs.
“That’s plumb bullish,” said Ari Wald, Oppenheimer technical analyst, of the jump in new highs. “Historically, that’s going to peak in the lead of the actual S&P. If that’s making new highs, that’s the kind of broad-based internal breadth that signals a continuing rage …The time to get concerned is when the S&P is making new highs and that’s making less.”
The S&P 500, Dow and Nasdaq all closed at a list highs Monday. The S&P finished at 3,191 Monday, up 0.7%, and was just 9 points away from its next technical assess at 3,200.
Wald said a positive sign for the market is the recent break out of microcaps.
“Usually at a meaningful market top, it will be the other way circa. Internal conditions will weaken first. The market will start to sell small caps,” said Wald. “It intent get picked up in the benchmark S&P last. You’ll see some narrowing of participation at the top.”
In another bullish sign, advancing issues outpaced duds three-to-one on Monday. The NYSE had 241 new highs and 27 new lows, while the Nasdaq had 342 new highs and 62 new enervates. Market volume for the exchanges Monday was 6.4 billion shares, which was above its 50-day average of 5.6 billion apportionments.
“It’s a very bullish market we have on our hands. It’s getting to be year two of the bull market that started in [December] 2018,” Wald mean, noting the second year on average has seen average gains of 11%.
“It’s really a market firing on all cylinders. It’s such a key stress here. It’s not just this narrowly focused large cap, growth story. We have Europe pushing to 20-year highs. The Euro Stoxx 600 is ballyhoo to its year 2000 peak,” he said.
Sentiment Trader said the jump in new highs is typically a good longer-term signal for myriad gains, but in the last two instances, the S&P pulled back over the next one to two months both times.
“When breaking out along with the S&P 500, this led to modestly definite medium-term returns, but the last two instances didn’t amount to much for the bulls, as the S&P pulled back over the next 1-2 months both times. Mostly, this was a skilled longer-term signal,” Sentiment Trader wrote.