This Broad Stock Rally Is Just Beginning

The past few months have been a roller-coaster ride... with a massive drop followed by a full recovery.

The rally we've seen in recent weeks has been extraordinary. And while plenty of folks are still questioning it, there's good reason to expect the boom to continue.

That's because the market is moving higher in a healthy way. Most stocks are climbing, according to two metrics. And that means we're in the middle of a healthy market rally.

Let me explain...

The Advance/Decline Line Is Hitting All-Time Highs

You can't just look at stock prices to gauge the health of the market. You need to dig deeper. That's because, at certain times, things can look fine on the surface... But, underneath, there could be a serious problem brewing.

That usually happens when a handful of big companies move the overall index higher while the majority of stocks in the index fall.

This divergence tends to signal a market top. The big guys can only carry things for so long. And once they fall, the floodgates open for lower prices.

Investors call this idea "market breadth." We want to see a broad rally, where lots of stocks are rising. And one simple way to check that is by looking at the advance/decline line...

This line measures the number of rising stocks from that day minus the number of falling stocks. Then, it adds that number to the previous day's reading, which was calculated the same way.

This is a cumulative series, meaning it builds upon itself with each day that passes. And when it rises, it means most stocks are moving higher.

The good news is that this is happening right now. The advance/decline line for the entire New York Stock Exchange ("NYSE") recently hit a new all-time high. Take a look...

The overall market hasn't hit a new high yet... but most stocks are climbing. That means we're seeing positive market breadth.

That's a powerful sign. It shows the rally is healthy... and that it can continue.

We see the same thing when we review our major index. The chart below shows the advance/decline line for the S&P 500 Index. And just like the NYSE's version, it recently hit a new all-time high. Take a look...

This S&P 500 rally is powered by far more than just the biggest names... The majority of stocks are climbing higher.

This is fantastic news for investors. It shows that this rally isn't a flash in the pan... It should have legs, which means the market will hit new highs soon.

Most investors are skeptical. But if you look at these charts, you can see that their worries are overblown.

Stocks are performing well. They're doing what we'd expect in a healthy bull market. And that means the massive rally we've just lived through will continue.

Good investing,

Brett Eversole