It’s looking more like the June low may be the start of a new bull market, according to data from Ned Davis Research. The S & P 500 has rallied more than 12% since hitting a June low that put the benchmark well within bear market territory. This has led to widespread debate on Wall Street over whether this is another bear market rally or the start of something else. Ned Davis Research’s data points toward the latter. The firm looked at market breadth during bear market rallies and during the first 30 trading days of a new bull market. They found that, since June 17, the percentage of stocks in the firm’s covered universe hitting new 21-day highs has reached as high as 52.8%. Meanwhile, the percentage of stocks hitting new 63-day highs got as elevated as 17.3%, and the share of names trading above their respective 50-day moving averages climbed to 76.6%. All three of those metrics are well above the max median readings seen during bear market rallies. They also outperform the breadth seen during the starts of most bull markets. “Compared to previous bull markets, the current case trails the technical improvement after recent lows like 2009, 2011, and 2016, but is stronger than the start of several bulls from the late-1980s through the early-2000s for most breadth measures,” Ned Davis Research’s Ed Clissold wrote in a note. To be sure, the market is still grappling with high inflation and tighter monetary policy — along with the prospects of diminishing earnings going forward — all of which could push the market back toward its bear market lows. Clissold also noted that the firm’s “Big Mo Tape” indicator, which measures the percentage of market sub-industries that are in an uptrend, is still sitting between the bear rally and new bull medians. Bottom line: Investors should remain cautious going forward, but market technicals are showing signs of improvement.
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