US Equity Markets: Signs of the Rising Tide Phenomenon

I’ve long been saying that pricing of equities are being influenced more by the inflationism (boom bust cycles) rather than the deep-seated conventional notion of discounted cash flows or other traditional metrics.

Even in the US we seem to be observing the “rising tide phenomenon” affecting the price actions of their equity markets, similar to the Philippines.

The recent rally in the US has been broad based and manifested across all sectors.

As Bespoke Invest notes, (chart theirs)

At the moment, 68% of stocks in the S&P 500 are trading above their 50-day moving averages. It's a strong breadth number, but it's still below the levels seen at prior short-term market highs over the past year.

Also Bespoke sees that the US rally has been supported by strong market internals

Bespoke observes, (bold emphasis mine, chart above theirs)

Last week's strength of group breadth was also notable given the fact that all 24 groups finished the day in positive territory on four different days. Looking back at data over the last ten years, we found that there has never been a period where all 24 groups were up on the day in four out of five trading days. In fact, prior to last week, there was never a period where all 24 groups were up on the day in even three out of five trading days.

This reminds me of Edwin Lefevre’s investment classic “The Reminiscences of a Stock Operator” where he quotes the legendary trader Jesse Livermore, (emphasis mine)

Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature.