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Market Update

|Includes: DIA, IWM, QQQ, SPDR S&P 500 Trust ETF (SPY)

Post-Brexit rally has been quite strong. The S&P 500 and DJI indexes made 8% in two weeks. It is natural that after such strong up move most of the technical indicators would be Bullish and many traders would start asking themselves whether this is the begging of a new Bull market or just the last agony before a recession.

Past two weeks rally strengthen the Breadth data as well. By looking at them now we see following numbers:

72.8% of the bullish stocks on the S&P 500 index
86.7% of the DJI stocks are bullish as well (26 versus 4 stocks).
66% of the Nasdaq 100 stocks are traded in the Bullish territory as well.
Only 58.2% of the Russell 2000 stocks are currently could be considered Bullish
70.2% of the NYSE Composite index stocks are bullish

These data are suggesting strongly bullish sentiment. Last time such strong bullish numbers were seen on the S&P 500 in March of 2015. On the NYSE composite last time such strong bullish advantage was spotted in September of 2014. Those quite strong bullish sentiment. It could be difficult to believe that after a year of negative, weak and neutral Market Breadth data, suddenly, in just two weeks, the sentiment became extremely bulish.

From one side such strong Breadth sentiment may attract the new investor to jump in the stock market and start buying. If this happen we may see further advance. From other side, if this is just an agony before strong decline, then it would be "sad" to buy now just to discover later that the buying was done at the top. We are in the second quarter earing season and any big company's bad report may push the market strongly down. We saw it over the past year and we know that such possibility exists.

In any case. According to the Breadth data, we should not be worried about any strong downturn at this point of time. If it is going to come it will not be like all stocks will crash for several days, unless we have something extremely bad which will lead to a "super crash". In all other cases, at first we will see increase in the number of Bearish stock on the Russell 2000, then if it spreads across the market we will see increase in the number of the Bearish socks on the NYSE composite. Still, as long as we have the number of the Bullish stocks dominant on the NYSE Composite index, we should not be worried about any serious decline down.

At this point the NYSE Breadth chart looks positive. See the chart below where green line represent the number of the Bullish stocks and red ine represents the number of the bearish stocks:


Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.