The stock market rally has history on its side — and one big dot-com caveat: Chart of the Day
Two market history studies are telling very different stories about this rally.
The first one is giving bulls permission to stay in the trade. The SPDR S&P 500 ETF (SPY) just flashed a rare weekly momentum signal, closing above its upper Bollinger Band for the first time in more than a year.
In plain English: The S&P 500 ETF just surged above its normal trading range — something it’s only done seven prior times since launching in 1993.
That can sound overheated, but the historical read from Astra Insights is more forgiving. Similar signals have often been messy over the next few weeks, but the longer-term returns have been strong, with the ETF positive nine months and one year later in every prior instance shown.
That’s the bull case in one chart: Strength tends to beget strength.
The second study is where the story gets trickier.
The S&P 500 (^GSPC) has been hitting records with fewer than 60% of stocks trading above both their 50-day and 200-day moving averages, according to Bespoke Investment Group, circulated by the Market Ear.
The only other period where that combination showed up was from December 1998 through March 2000 — the final stretch of the dot-com melt-up.
That doesn’t mean the market is necessarily due for a repeat of the 2000 sell-off. It does mean the rally is starting to rhyme with one of the most famous narrow, momentum-led markets in history.
Yahoo Finance has been tracking that same under-the-hood issue for months. More recently, Yahoo Finance Executive Editor Brian Sozzi noted that the S&P 500 index had also moved unusually far above its 50-day moving average, another sign that the rally has been powerful — and increasingly stretched.
Other dot-com comparisons have been popping up in the chip trade.
The PHLX Semiconductor Index (^SOX) just notched its best 29-trading-day gain since March 2000, and Bespoke also notes the benchmark chip index is the most stretched from its 50-day moving average since November 2002.
The current bull market that began in late 2022 has weathered several patches where megacaps did nearly all the lifting, only to see other parts of the market kick in just when the leaders started flagging.
Bulls need that handoff again.
The momentum signal says this rally can keep going. The dot-com caveat says it gets harder to trust if fewer stocks keep doing the work.
Strength can still beget strength — but the next phase needs more company.
Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com.