Signs of Health Are Stacking Up for Stocks

Last month, a huge cloud of market uncertainty lifted for investors. Donald Trump won the presidential election for a second term. And just about everything rallied on the news.

The major stock indexes were all up 2.5%-plus the day after the election. The mid-cap benchmark – the S&P 400 Index – rose 4.1%. And small-cap stocks soared 6.1%.

Everyone will have a different explanation for why stocks roared higher. Some will say it was because Trump won. Others will say it was simply the removal of election-related uncertainty.

Either way, we know one thing... If you were worried about the health of this bull market, you don't need to worry anymore.

There are good bull markets and bad bull markets. In the bad ones, only a few stocks drive the market higher. And that eventually becomes a house of cards waiting to tumble.

In the good ones, everything rallies. There's strength across the board. And like it or not, that's exactly what we have right now.

Consider that during the postelection rally...

• Every major U.S. index hit an all-time high.
• The S&P 500 Equal Weight Index hit an all-time high.
• Mid-cap stocks hit an all-time high.
• Small-cap stocks hit an all-time high.
• Financial, transportation, and industrial stocks all hit all-time highs together, too... a sign of a strong economy.

For practical purposes, every important area of the market has been soaring.

If you still think the Magnificent Seven is the only group of stocks driving the market higher, you're dead wrong. This is as broad and healthy a period as we've seen since the bull market took off two years ago.

To see it another way, we can look at the advance/decline line of the New York Stock Exchange. This cumulative series takes the number of daily winners minus the number of daily losers, then adds the number to the previous day's total.

Basically, it's a way to see how many more stocks are rising than falling. When the advance/decline line is rising, most stocks are going up.

Importantly, we want to see this series hit new highs alongside the overall market. And that's exactly what has been happening. Take a look...

The advance/decline line isn't flashing a warning sign today. It's giving the boom a green light. This is as healthy a bull market as we could hope for.

That doesn't mean we will never see any surprises from here... That's always possible. It's also possible that the rally is starting to get ahead of itself. But that doesn't mean the good times are over.

The best time to make money is when things are working... when there's a broad and healthy rally in place. And that's exactly what we have right now.

You want to stay bullish until that changes.

Good investing,

Brett Eversole