From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
We’ve pounded the table about historic breadth thrusts since we first saw these readings start to pop up in early June of last year.
It’s now a year later, and we’re still seeing them… In fact, the S&P 500 recently registered its highest percentage of new 52-week highs in history – absolutely crushing the historic reading we saw in Q4 of last year.
So, why is this important?
These extreme readings are as bullish as it gets and are a very common characteristic of the early innings of a fresh bull market. It’s as simple as that, right?
Well, yes… But, not exactly…
While these extreme readings in our breadth indicators are undeniably bullish looking out over any period of more than a few weeks/months, over the very near-term these same bullish developments are actually cautionary signals and are often evidence of exhaustion and tend to be followed with some corrective action.
But what happens when our original November 2020 breadth thrust of 28% is eclipsed by an extra 16% about 6 months later?
Such extreme surges are incredibly rare… Let’s have a deeper look at what this could mean for investors over both long and short timeframes.