A pattern that has played out across most recent market cycles is that breadth peaks ahead of price. So what are we seeing with breadth now, given the recent strong move higher in stocks?
Notice that yesterday's gains came on a breadth surge. The top chart shows us expanding the number of common stocks across the NYSE that are making fresh three-month highs vs. those making new three-month lows. Indeed, that number now exceeds the new high strength we saw at the September market peak--not something you'd expect if the stock market were weakening and setting up a head-and-shoulders top.
Similarly, the bottom chart shows the number of NYSE shares closing above their upper Bollinger Bands vs. those closing below their lower bands. This, too, has marched to new high ground, eclipsing September levels. New highs are around levels that have marked recent momentum peaks going back to the second half of 2013, so it would not be unusual to see some give-back in the near term. Perhaps the more important takeaway is that the stock market is displaying expanded breadth relative to September, not a continuation of the weakening we saw from July through September.