We Haven't Seen This Kind of Momentum Since 2009

S&P 500 Index (SPX) stocks are muscling higher at a rate not seen since 2009, and bulls are starting to emerge

Jul 14, 2016 at 3:37 PM
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Considering the S&P 500 Index (SPX) has notched a record high for the fourth straight day, stocks' post-"Brexit" bloodbath seems like another lifetime ago. Since its June 27 intraday low south of 2,000, the S&P has rocketed to an all-time peak of 2,168.99, at last check -- a roughly 8.9% surge in less than three weeks. Against this backdrop, stocks are muscling higher at a rate not seen since 2009 -- and bulls are starting to emerge.

The 10-day average of advancing S&P 500 stocks was just 43.9% on June 16, roughly one week before the "Brexit" vote, which marked the lowest reading since Jan. 21, according to Schaeffer's Senior Quantitative Analyst Rocky White. Since then, the 10-day average of S&P advancers has skyrocketed to 73.2% -- territory not seen since July 24, 2009 -- a few months after the March 2009 bottom.

SPX Advancers July 14


Echoing that, the number of optionable S&P stocks hitting a new 52-week high (over a 10-day stretch) was at a meager 0.4% on Jan. 26, 2016 -- the lowest point since March 2009. Now, however, that number has skyrocketed to its highest point since early 2015.

SPX New Highs July 14


In light of the recent rally, option traders are turning bullish. Not only did SPDR S&P 500 ETF Trust (SPY) call volume exceed SPY put volume for a notably long stretch -- a rare options signal in and of itself -- but call volume on the SPY, PowerShares QQQ Trust (QQQ), and iShares Russell 2000 ETF (IWM) jumped 31% over the past 10 days. That's the biggest two-week surge since December 2015, according to Schaeffer's Quantitative Analyst Chris Prybal. As such, the combined 20-day buy-to-open put/call ratio on the SPX, SPY, QQQ, and IWM just suffered its steepest drop since late 2015, when stocks were recovering from the August sell-off.

20Day BTO Puts July 14


Further, the five-day average put/call ratio on the Chicago Board Options Exchange (CBOE) indicates the "lowest levels of put buying seen during the last two years," according to CNNMoney. The website's "Fear & Greed Index" is now pointing to "extreme greed," compared to "neutral" one month ago, and "fear" one year ago.
 
Options traders aren't the only group exiting the bears' camp, though. The percentage of Investors Intelligence (II) bulls rose to 52.5% last week, while the percentage of self-proclaimed bears essentially remained flat at 24.7%. In the first half of 2016, the percentage of II bulls averaged just 39% -- a bullish signal for the second half of the year, historically speaking.

The II bulls-minus-bears line is now at its highest level since before the August 2015 swoon. Going back to 2005, though, the bulls-minus-bears line is just slightly above average, meaning there's still plenty of pessimism left on the sidelines to fuel further gains.

II Bulls Bears July 14



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