Market breadth is rebounding sharply. RSP, the equal-weight S&P 500 ETF, is up about 4% since October 2, and the percentages of S&P 500 stocks trading above their 20-, 50-, and 200-day moving averages are rebounding aggressively. More stocks are joining the advance, and that is exactly what I want to see.
In my October 2 article, Breadth Is So Bad It Might Be Good, I laid out why washed-out participation could set the stage for a sharp recovery as the stocks correcting beneath the surface started catching up.
This is the improvement we were preparing for. The evidence increasingly points to a correction beneath the surface rather than a market top.
My outlook is bullish: I expect higher prices into year-end, and I think now is the time to buy the leaders as they offer proper setups with risk we can define.
Tonight’s Established Leaders scan is where I’m starting.
67 stocks qualified after the October 15 close. The median TTI Score is 84, with 33 names scoring 85 or higher across nine sectors. The top score is 93.
After yesterday’s semiconductor discussion, I want to look at where leadership is still intact. Health Care accounts for 24 names in tonight’s report, followed by Information Technology with 18 and Energy with nine.
