Well, we dipped below 1000 in the ES overnight on weakness in Asia and news that China would be cutting back on business lending, but a turnaround in very early morning trade lifted European stock markets and sent those ES futures above yesterday's high and knocking at the door of the highs for this bull move (chart above).
It's yet another example this week of how money managers have jumped on short-term weakness to buy stocks, putting sidelines money to work. Not surprisingly, we're seeing buying across those correlated risk assets, with a rise in gold and oil and a rise in the euro vs. the U.S. dollar. Interestingly, we're not seeing particular strength in 10-year Treasury yields. I'm watching the EUR/USD this morning; it's looking just a bit toppy as of this writing.
Should we see new bull highs in stocks, we would likely see considerable divergences among indicators and sectors. As this morning's Twitter posting indicated, we only had 698 stocks make 20-day highs yesterday, against 229 lows. That compares to over 3000 20-day highs in the last half of July. I'll be tracking the indicators closely this weekend and will post to the blog.
My momentum indicator of Demand vs. Supply has been strong the past two days; we're not yet seeing meaningful topping in that sensitive measure. We're also at bull highs in the daily advance-decline measure for NYSE common stocks. Both suggest decent breadth to the recent rally, fueling this test of bull highs.
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