A larger number of stocks have propelled the growing US market lately, a signal that – if history is an indicator – there could be higher gains.
However, what remains in the debate is how smooth the ascent will be.
Indicators indicating a stronger and more resilient stock market have recently reached rare milestones as the bullfight continues to expand again. In the last week, shares ranging from UnitedHealth Group Inc. at L Brands Inc. to Vulcan Materials Co. reached 52-week highs, joining another 184 in the S&P 500 who did the same. These gains contributed to the extension of the benchmark rally for this year to 11% – noting 23 records along the way.
Investors and analysts often look at technical indicators that measure the width of the market rally to give clues about the direction they are going. A market is generally considered healthier when several stocks grow together, and the signs of strong participation are usually seen as a signal that a rally is on its feet. In contrast, a low-width market – such as that of the late 1990s, near the tip of the dot-com bubble – indicates fewer stocks with higher market capitalizations that support the load.
Lately, there have been signs of strong width, a reversal from much of last year, when a small group of large technology stocks accounted for much of the market gains. Last week, the share of shares in the S&P 500 traded above the 200-day moving average exceeded 95%, rising to its highest level since October 2009, according to data as of Thursday. In just three other periods since the beginning of 2000, this measure has exceeded and then exceeded 95% for several days, according to an analysis of Dow Jones market data based on the constituents of the current index.