Five Bull Market Barometers Update (05-29-2020)
The percentage of stocks above their 200-day moving average remains subdued, at just about 7% where it's been for the last three weeks. Our signal is when this indicator gets decisively back above 15%.
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The Large-Cap/Small-Cap stock ratio continues to sit near all-time highs, showing that risk appetite among market participants remains weak. Institutions that drive major market trends are still hiding out in the biggest companies, not venturing out into the "riskier" Small and Mid-Cap stocks.
Nifty Bank, the largest sector of the market, has finally started to mean revert after crashing over the last few months. This is positive but we need to see consistent stabilization, not just one weak of strength.
Copper above 410 would show that market participants are becoming more optimistic about global growth expectations and risk assets. We closed the last two weeks at right at 410, so we need to see prices confirm this strength by continuing higher. It's too close to call yet.
"Safe haven" US Treasury Bonds, which serve as a benchmark for Interest Rates around the world, made new weekly closing lows. The long-term trend suggests that money continues to flow into Bonds, not Stocks.
Zero of the five “Bull Market Barometers” we’re monitoring are currently above their key levels. Not much has changed in May.
With that being said, the short-term momentum remains to the upside. Last weekend we outlined 6 charts that would set the tone for the rest of the quarter and they're all resolving positively.
Additionally, we're seeing weak stocks catch a bid following failed breakdowns and bullish momentum divergences. Here's Havells India, which has been a major underperformer, holding support at 452 and moving higher. Is it's longer-term trend still broken? Yes. But could it rally 90 points towards 585? Also yes. Know your timeframe.
And here's Piramal Enterprises consolidating sideways over the last 2 months. A breakout above 1,000 would signal a continuation of its counter-trend rally and point to upside towards 1,400. Again, know your timeframe here, but if we're talking about the next few weeks and month then it appears this stock, and many like it, still want higher levels.
Sometimes it pays to keep it simple. When more and more stocks, indexes, and global markets are resolving higher rather than lower in the near-term...we've got a market telling us it wants to head higher. This is why our list of Trade Ideas on the long side has been expanding and our list of short ideas has been shrinking throughout May.
Despite the longer-term concerns that remain, the market's path of least resistance remains to the upside as we head into June. As such, we're continuing to err on the long side.
Premium Members can head over to our Trade Ideas page for a summary of all our recent setups/posts.
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Allstarcharts Team