What's Propping Up Stock Market

Market Summary

A tool to help confirm the overall market trend is the Bullish Percent Index (BPI). The Bullish Index is a popular market “breadth” indicator used to gauge the internal strength/weakness of the market. Essentially it is the percentage of stocks that have buy signals. If the market is strong and moving up, the BPI should also be moving higher as more and more stocks are purchased. Nasdaq stocks are leading the market higher as quarterly earning numbers have enticed investors. Strength in technology and small cap stocks are primarily propping up the market. As long as the BPCOMPQ remains in an uptrend expect the overall stock market to remain near all-time highs.

 The Fed continues its Dovish outlook despite better economic data and a solid economy. You can see in the graph below how small and midcap stocks are holding up better than the large caps of the Dow and S&P 500 as group rotation into technology, health care and real estate continues to absorb any selling. The S&P 500 remains extended, and that’s one reason for the swap to the smaller cap and tech stocks.

By Gregory Clay

Investment Strategist

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gregoryclay@nellaadvisors.com

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