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Usually sequels don’t live up to the hype but this may just be an exception. If the $600 billion (soon to be more) QE2 from the Federal Reserve wasn’t clear enough, Bernanke’s Op-ed piece in the Washington Post trumpeted his strategy of inflating asset prices in a “Hail Mary” pass to produce real economic growth.
Wall Street celebrated with an orgy of buying filling green across trading screens. Practically everything was higher - with the exception of the US dollar. Most commodities participated in the rally and gold reached a new high of $1392.
The rally was breathtaking in scope and breadth. The S&P 500 index 1.93% closed higher and the Nasdaq Composite trailed with a 1.46% gain. Advancing issues lead 5:1 on the NYSE and 3:1 on the Nasdaq.
New 52 Week Highs
The number of issues making new 52 week highs spiked across the board. Almost all sectors enjoyed the push higher, including the financial sector. But it has the lowest level of new 52-week highs.
According to Bespoke Investment Group 24.6% of the components in the S&P 500 index closed at a new 52-week high. This is the best showing since April 26th when 33% of them did the same.
On the Nasdaq there were 12.5 times as many new 52 week highs as lows. That may seem like a lot but in January and April 2010 this indicator spiked to 100+. The last time we saw this many stocks making new 52-week highs was in April 2010:
Obviously we do need to see 52 week highs in order to have a bull market. Having said that, spikes that produce an exaggerated number of new highs usually indicates an exhaustion (top). But relative to the number of new lows, the new highs are still not at critical levels.
The rally also pushed the cumulative advance decline breadth for the S&P 500 index above its previous top, reached on April 23rd 2010:
This confirms the wide participation of individual stocks and sectors in this rally. Based on this, the “average” stock market, rather than the capitalization weighted index is already above the April 2010 high. We can see this as well by looking at the S&P 500 Equal Weighted index which just peeked over its April 26th top (1832.50) by closing at 1833.36 today.
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