June 11, 2010
Both the S&P 500 Index (SPX) and its tracking ETF the S&P Deposit Receipts (NYSE: SPY) are now in BUY territory according to a long term indicator.
Three weeks ago the stock market had the first in a series of huge single-day rallies. On Wednesday May 26, the up volume vs. down volume on the NYSE was 20 to 1.
Subscribers know that we watch for these unusually strong days (better than 9 to 1) and call them breadth explosion days. Two such days in a two month period tend to be followed by substantial gains in the following months.
Historically these signals have been rare, in some cases they have been 10 or more years apart. Over the past several years that has not been the case, with signals occurring more frequently. But according to our records, they have all been followed by substantial gains.
Last week there was a second breadth explosion day. On Thursday June 3, the rally was on up vs. down volume of 36 to 1. A huge advance. This fulfilled the technical requirement for a buy signal according to this indicator. Advances are not always immediate, but within six months to a year, stock indexes have generally been 14% higher or more.
Now we have had the third such breadth explosion day, with up volume exceeding down volume on the NYSE by 44 to 1.
All three of these rallies have occurred on volume so far above the required 9 to 1 ratio we are left with little to add except that, buy this one indicator; we are at the beginning of a substantial advance and possibly a new bull market.
Disclosure: The Fibtimer.com (www.fibtimer.com) ETF Timing Strategy has a position in the S&P 500 SPDRs.