One thing we know about all-time highs is that they are not evidence of a downtrend. With near-record pessimism towards stocks recently, it’s fun to watch the ones that are breaking out to all-time highs. I’m not really sure what everyone is so angry about, these long bases are slowly breaking out one by one, not breaking down.
Something we’ve been pointing to all along is that for the major indexes to take out resistance from the past 17 months, we need to see an expansion in participation to the upside. In other words, more stocks, sectors and indexes breaking out to all-time highs. This expansion of breadth is likely to lead and/or coincide with an upside resolution in indexes like the S&P500, Dow Jones Industrial Average, Global100 Index and many others.
See: Triple Tops Are Rare And Quad Tops Fuggedaboutit regarding the DJIA & Global100
This month we can add Switzerland to the (short) list of indexes around the world breaking out to all-time highs. Are you bullish stocks? Do you want them to go up? Well in order for them to do so, you’re going to need to see more indexes like this one taking out former highs:
In this case, the Swiss Market Index is not only taking out the early 2018 highs, but this resistance actually goes all the way back to the 2007 highs. This is a really important breakout. If we’re above former overhead supply from the past 12 years, it’s hard to be bearish Swiss stocks. And if we’re bullish Switzerland, then Europe in general can’t be too far behind.
Take a look at the Euro STOXX 600 Index, a broad measure of European equities. That resistance early last year felt in stocks all over the globe goes back to early 2000 in the case of Europe. While the S&P500 took out its 2000 and 2007 highs several years ago, European equities have struggled, making this level all that more important:
We’re watching Swiss stocks as the leader here. If this continues, which all the evidence is pointing that it should, I believe we finally get that breakout in Europe that many have been anticipating for many years. This would be a historic breakout after almost 20 years of consolidating the gains in the 90s.
It’s hard for me to be bearish stocks as an asset class if Europe is breaking out of a 20 year base.