This Rally Is More Broad Based Than You Think

The most hated stock market rally I've ever seen continues to defy gravity. I'm not going to list all of the factors that the non-believers will bring up to justify their lack of participation. But one thing that stands out as an excuse is the lack of broad stock participation. I'm hearing and reading throughout the media that the cyclicals aren't cooperating and this is just a defensive rally.

Well I'm not sure if we're watching the same stock market, but I see Energy dramatically outperforming everyone else this past month while retailers ($RTH) are just pennies away from all-time highs. But forget about that for a minute. Take a look at the recent breakout in S&P500 stocks trading above their 200-day moving average:

Typically the bulls are in charge when this percentage remains above the 50% mark. And after a brief breakdown in early June, the indicator consolidated nicely for a couple of months and just broke out to new highs last week. This signals to us that participation in this stock market advance is broadening. And that's obviously a good thing.

So be careful where you get your information. This indicator tells me that the market is moving higher together and not just in some of the more defensive areas.

Tags: $RTH $XLE $SPY