Interesting times for markets as breadth metrics, which became heavily oversold in March, are now becoming heavily overbought on the upside. Ultimately, the heavily oversold condition in March helped create the conditions for the rally—so will the heavily overbought condition go the other way?
The Percentage of NASDAQ Stocks above the 50-day MA is well above the peak from January 2020—and the peak for this metric at any point since its inception; 84.67% was the last peak in May 2003, but if you consider this, what followed in May 2003 was a continuation of gains for another 5 years, up until the credit crisis in 2008.
NAA50
R Daily Chart
R Daily Chart
If you look at the long-term picture, the NASDAQ rally from March 2009 to today is incredible, totally dwarfing the losses from the Tech Bubble, 9/11, the credit crisis, and even the COVID-19 pandemic. It's possible the COVID-19 pandemic is not the end of the bull market...
COMPQ - Monthly Chart
Going back to the daily focus, the NASDAQbroke on Tuesday, but closed with a bearish 'black' candlestick and then a successful defense of support yesterday.
COMPQ Daily Chart
The S&P enjoyed another accumulation day which saw a close above the 200-day MA. This came on higher volume accumulation. The earlier 'bull trap' is negated. However, the index has continued to lose relative ground against the Russell 2000—which is actually bullish for the market as a whole, even if not for the S&P, given the importance for growth stock leadership.
SPX Daily Chart
Finally, the Russell 2000 (via i
Shares Russell 2000 ETF (NYSE:IWM)) gapped the (March) gap and made a move towards its 200-day MA. Technicals are all bullish as relative performance continues to improve. Volume rose in accumulation as buyers continue to flock to growth stocks. This is healthy action for the broader rally.
IWM Daily Chart
Going forward, we will want to see the Russell 2000 accelerate its role as market leader and the early signs are positive since the market bottomed in March. All indices are performing well.
