Even with the impressive bounce heading into the weekend, the S&P 500 last week didn’t even get back up to its December high. Meanwhile nearly 10% of the industry groups in the S&P 1500 and more than 10% of global markets closed at new 52-week highs. That’s the longest new high list by the rest of the world in nearly a year.

The conditions for the re-birth of a bull market were met earlier this month, but the confirmation of strength has been underwhelming. Of the six indicators on our bull market behavior checklist, only one is currently meeting the bull market criteria.

Coming into this week, we’ve seen more new highs than new lows every day so far this year. Improved breadth helped fuel a higher high for the S&P 500. But with the index dropping back into its December range and new highs struggling to expand, the going, for now, is getting rough.

The Value Line Geometric Index peeked above its August high but it continues to struggle with sustaining strength. We don’t have evidence at this point of that being a meaningful peak but for now this proxy for the performance of the median US stock is trodding across well-traveled ground.

The number of stocks making new lows remains negligible. Last week, the number of stocks making new 52-week highs on the NYSE + NASDAQ surpassed a number of prior peaks (Dec 2021, Apr 2022, Nov 2022). It’s now at its highest level since November 2021.

2023 is on the cusp of producing as many days with new highs greater than new lows in its first month as 2022 produced over the course of the entire year. Yet there are hurdles to overcome to convincingly argue that this recent strength is sustainable.

The S&P 500 has rallied off of its October and December lows, but the 200-day average, which rolled over in April 2022, continues to fall.

The shorter-term risk indicators have teased the possibility in recent weeks, but now for the first time in a year, our longer-term Risk Indicator has moved into Risk On territory.

More Context: This risk indicator is made up of 20 (intermarket and intramarket) ratios that pair various risk on and risk off assets. It ebbed and flowed over the course of 2022 but remained in Risk Off territory all of last year. Paired with the turn higher in our net new high advance/decline line, this is evidence of an improving backdrop for risk assets. These are not discrete signals (like so many breadth and momentum thrusts) but are continuous indicators of the environment in which we, as investors, are operating. 

New highs exceeded new lows last week for the first time since August (and only the third time since November 2021). That is a positive development but there is more work to be done before concluding that a new bull market has been reborn.

The uptrend for bonds peaked in early 2021. The trend for stocks did so a year later. Commodities peaked in June and over the past few months the trend has been slowly (an unevenly rolling over). 

Key Takeaway:

Key Takeaway: