Yet Another Breadth Thrust to Frustrate Shorts

Just leave it to this market. Unbelievable.

Seemingly whenever something negative triggers, buyers show up immediately. We saw on Monday that the S&P 500's approach to its former high was accompanied by a negative McClellan Summation Index and more 52-week lows than highs on the NYSE.

No matter, stocks continued to rise, and breadth turned around. The switch was dramatic enough that more than 75% of volume on the NYSE flowed into advancing securities. It happened on Monday, too. And Friday.

NYSE up volume

Over the past three years, this is only the 3rd distinct time that the 3-day average of NYSE Up Volume has neared 80% (lumping together the handful of post-pandemic thrusts as one).

Since 1928, there have been 86 non-overlapping periods with 3 consecutive days of 75% or greater Up Volume. Like we've seen so often, the primary highlight of thrusts like this is a remarkably positive risk versus reward ratio over the medium- to long-term.

Across all time frames, the S&P 500's average return was well above random, the average drawdown (risk) was a small fraction of drawup (reward), and there was a much higher probability of a big rise than a big drop.

What else we're looking at

  • Full details of forward returns after a 3-day breadth thrust, including when at new highs
  • What it means when microcap stocks show relative weakness
  • Gold hasn't made a new high in over a year - what that means for gold and miners

Stat box

The 4-week rate of change in corporate insiders buying shares of their own stocks in the Basic Materials sector has reached 161%, the highest velocity in more than 5 years.


A year of frustration. Gold hasn't made a new high in over a year. This can be especially troubling when the dollar has broken out to the upside after a long consolidation. 

gold no new high

Micro underperformance. The relative performance of micro-cap stocks, some of the smallest in the public markets, is trying to perk up after a couple months. This is a sign of returning risk appetite among investors.

micro cap stock relative performance

No pessimism. For the 29th time this year, not a single one of our core indicators is showing excessive pessimism.

sentiment indicators showing pessimism

The post titled Yet Another Breadth Thrust to Frustrate Shorts was originally published as on on 2021-08-26.

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