Over the last few months, we’ve presented a couple of simple quantitative studies meant to encapsulate the factors driving our Major Trend Index to the brink of bear territory. The chart and table might provide the best summary yet.
We’ve detailed the growing degree of stock market bifurcation, but the problem for would-be bears is that such bifurcation can reach astonishing levels (witness 1999-2000) before the market is set to peak out.
The renewed embrace of risk hasn’t extended to the sector level. After resisting decline in late September through mid-October, defensive sectors have matched the rebound in Cyclicals, almost point for point.
Whether one considers the post-2008 upswing two bull markets or one ultimately matters only to those who (like us) enjoy cataloging such things. But labeling the 2011-2013 rally a new bull market would certainly explain some of the “immature” behavior exhibited by U.S. stocks in recent months.
With July’s market surge producing new cyclical highs in virtually every important subgroup (other than Utilities), it’s difficult—if not dangerous—to question the U.S. stock market’s technical underpinnings.