The nerves of equity market participants have certainly been tested over the last three months. Since last November, major U.S. indices have chopped up and down with above-average volatility… but, frustratingly, with little net movement.
Now, it seems newfound bullish sentiment is beginning to show in the form of higher prices. As I told Cycle 9 Alert subscribers yesterday, signs of investors’ bullishness abound.
For one, small-cap stocks (i.e. the Russell 2000) continue to outperform their large-cap cousins (S&P 500 and Dow). Here’s a chart that shows this bullish sentiment indicator…
But there are several more indications of bullish sentiment re-emerging. Here are just a few:
- The ratio of advancing stocks to declining stocks continues to climb. This index has now made a new high, breaking above the level we saw last September. Broad-based participation (i.e., a wide range of stocks trading higher) is a sign that a bullish trend has legs to run.
- The ratio of consumer discretionary to consumer staples stocks continues to climb. This suggests investors are investing in higher risk, higher returnrn sectors instead of “defensive” sectors.
- Many sectors have now broken to new price highs, including: materials (XLB), consumer discretionary (XLY), technology (XLK), health care (XLV) and industrials (XLI).
In total, these are all indicators that investors’ confidence and risk-appetite has returnrned. And as a bullish breakout has been in the works for a few weeks now, we’re starting to see this bullishness show in the form of higher prices.
I’ve had Cycle 9 Alert subscribers positioned in two bullish sectors for several weeks and we’re now reaping the rewards. I’ve also recently showed them how to make a low-risk play on the still-beleaguered energy sector.
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