Fundstrat’s Tom Lee believes the stock market may be turning around, citing four key indicators. He shared his insights in a recent YouTube video.
Four Signs Pointing to a Bullish Reversal
Lee highlights the following signals suggesting a potential market rally:
1. Zweig Breadth Thrust: This indicator, which tracks the ratio of advancing to declining stocks, triggered on April 24th. Historically, this has been a strong predictor of upcoming market rallies. According to Lee’s data, in the 11 times this has happened since 1978, markets have been higher one, six, and twelve months later.
2. High Yield Options Adjusted Spreads (OaS): The OaS retraced 50% of its widening on April 23rd. A decrease in credit spreads (the difference between risky and safe bonds) usually indicates increased investor confidence and reduced recession risk. Lee notes that this reversal suggests a retreat from earlier recession fears.
3. Consecutive Days of Broad Market Gains: The S&P 500 experienced two consecutive days with over 90% of its stocks rising. This is a historically bullish sign, with past instances leading to positive market performance in the following three, six, and twelve months.
4. VIX Volatility Index: The VIX, a measure of market volatility, closed below 31. Lee interprets this as a signal of decreasing future volatility and increased potential for stock market strength.
Disclaimer:
This information is for general knowledge and does not constitute financial advice. Always conduct thorough research and consult a financial professional before making investment decisions./p>