From Cabot Top Ten Trader
This week one of our key blastoff indicators has turned green—on Wednesday, 90% of NYSE stocks closed above their respective 50-day lines, which, when it occurs after a market downturn, is rare and almost always bullish. Drawdowns on the S&P 500 tend to be limited from that point in time, while future returns (20% or more sometime over the next year) are solid. To be clear, no indicator is perfect, and 2020 has been a rule-breaking sort of year, so there are no sure things. But there’s no question the 90% signal is a major arrow in the bulls’ quiver, at least when it comes to the major indexes and broad market. Long story short, we remain optimistic, but we’re keeping our eyes peeled for a further change in the market’s character and are looking for solid entry points.
Updated May 29, 2020 