Market rally: is this time different?

Companies selling things people want are outperforming those selling things people need, which is a good sign

Bears like Jeremy Grantham might see recent strength as another bear market rally, but the technical action increasingly suggests this rally really is different. Globally about 90 per cent of stock markets are above their 200-day moving average, notes All Star Charts’ Willie Delwiche, the highest number since March 2021.

Importantly, it’s way above anything seen during the failed rallies seen in the first half of 2022, which were characterised by ever-dwindling participation. In the US, says Delwiche, almost every day this year has seen more stocks hitting new highs than new lows. Indeed, there were almost as many such days in January as in all of 2022.

Technical strategist David Keller says indices tracking consumer discretionary stocks are breaking out relative to indices tracking consumer staples stocks – that is, companies selling things people want are outperforming those selling things people need. The same indicator warned of impending weakness when it peaked in November 2021, two months before markets topped out, but now it’s indicating impending strength.

Additionally, the S&P 500′s 50-day moving average is about to cross above its 200-day moving average. Some technicians see this so-called golden cross is confirmation of a change in trend – from bear to bull market.

Proinsias O'Mahony

Proinsias O'Mahony

Proinsias O’Mahony, a contributor to The Irish Times, writes the weekly Stocktake column