A widely used signal on the stock market's health has hit an all-time high, possibly setting the stage for a further rally of US stock indices, technical analysts say.
New York's stock market advancement / recall line was constantly high on Wednesday, as shown in the chart below from StockCharts:
Paul Schatz, president of Heritage Capital, told MarketWatch in a telephone interview that "never carry markets, ever, ever begins when the A / D line makes a full time high. "
Woodbridge, Connecticut-based investment manager also said that the A / D line" is historically 90% accurate when predicting large-scale bear markets. "
Technical analysts are the A / D line the most widely used indicator measurement market width and represent a cumulative total of the number of shares that progress towards the number of shares that decrease. As the A / D line rises, it means more stocks are rising than falling, and vice versa.
MarketWatch's Snapshot of the Market
The number of stock markets is in excess of decliners 1,673 to 1,079 on the NYSE and 1,492 to 1,168 on the Nasdaq, while the volume of accelerating stocks represents 64.8% of the total volume of the Big Board and 64 , 5% of Nasdaq's total volume.
The bullish A / D reading comes after the shares have expanded a recovery that has taken the major stock bases to the highest levels in 2019, after they had the worst downturn record for trading session immediately before Christmas.
Dow Jones Industrial Average
DJIA, + 0.18%
is up 18.8% from December 24 low, S & P 500
SPX, + 0.11%
has also increased by about 18%, Nasdaq Composite Index
has advanced 21% from the nadir.
The downturn had been attributed to a combination of growing fears of economic disaster coming from China's trading spree with the United States, and concerns that the Federal Reserve moved too aggressively to normalize monetary policy and create ripples in financial markets.
These issues have now been reduced by Wall Street investors expecting Beijing and Washington to enter into a collective agreement soon, even though an incomplete and Fed has stated a waiting period to increase investor loan costs.
"The week of the week is the bearish case crumbling; everything the bears hung their expectations fall apart," says Schatz. "It does not guarantee that the shares will continue to tear higher, but it isolates the stock market from a major decline," He
JC Parets of the All Star Charts blog is also sanguine about record A / D reading. "This expansion of upward width continues to point to higher stock prices from some kind of medium-term perspective," he wrote on Wednesday.
To be sure, concerns about the durability of today's race continue, especially given the apparent rate at which stocks snatched back from bad downs.
skepticism about today's decline is partly rooted in the belief that stock gains have renewed stock valuation concerns, as earnings do not is expected to shine in the coming periods, SP 500's price-to-earnings ratio, a popular stock-value target, over the next 12 months is at its highest n October, at 16.27, after touching a low of 13.59, according to FactSet data (see chart below):  Source: FactSet
Also, there is concern that the more markets are improving The back of a US-China trade deal, the more likely the Fed may be to resume its apparent pace of interest rate hike, which could potentially burn a new route.
"Bulls hope a surprisingly strong trade breakthrough in the US and China, keeping the consensus revenue forecasts down from operations in 2019, just as the tax cuts kept the forecast forecasts high in 2018. The problem is that even if it happens, with 16.5x 2019 CY earnings , the large capital stock appears to be valuable with only 4.2% consensus 2019 EPS growth forecasts, "wrote Alec Young, managing director of global market research at FTSE Russell, referring to the 2017 rate reduction rate signed in law th by offering a fileip to companies.
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