Four Signs Indicating a Bullish Reversal in the Stock Market, According to Fundstrat’s Tom Lee
Fundstrat’s head of research, Tom Lee, recently shared four key indicators that suggest the stock market is on the brink of a bullish reversal. These signals point towards a potential uptrend in the market, providing hope for investors amid uncertain times.
Zweig Breadth Thrust Triggered on April 24th
Lee highlighted the activation of the Zweig breadth thrust on the S&P 500 index on April 24th. This indicator, which calculates the ratio of advancing stocks to the total number of stocks, has historically preceded stock market rallies. Lee emphasized the significance of this event, stating, “That has happened 11 times since 1978 and notably, one month, six months, and 12 months later, stock markets are always up.”
High Yield Options Adjusted Spreads Retraced 50%
On April 23rd, the high yield options adjusted spreads (OaS) retraced 50% of its widening, signaling a reduction in credit spreads. This retracement indicates improved stability and investor risk appetite, moving away from recession risks. Lee explained, “If high yield spreads had gone from 500 to 1,000, a recession was guaranteed, but instead it’s reversed almost all the widening back to even levels before April 2nd.”
90% of S&P 500 Stocks Rallied for Two Consecutive Days
Lee pointed out that the S&P 500 experienced two consecutive days where 90% of the stocks rallied, a phenomenon that historically leads to further upside. He noted, “That means that stocks, within a couple of days apart, had posted two days where the advancing gains were 90% or more. As you can see here, three times since 1979, stocks are higher three, six, and 12 months later.”
VIX Closing Below 31
Lastly, Lee discussed the volatility index (VIX) closing below the 31 level, indicating a decrease in future market volatility and potential strength for equities. This decline in volatility suggests a more stable market environment, which could bode well for investors.
As investors navigate through the complexities of the stock market, keeping an eye on these key indicators highlighted by Tom Lee could provide valuable insights into potential market trends and opportunities for growth.
Follow us on X, Facebook and Telegram
Don’t Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Check Price Action
Surf The Daily Hodl Mix
Generated Image: Midjourney