More individual stocks are hitting new highs, and that often bodes well for further market gains.
According to Sentiment Trader, just about a year ago about 40% of stocks listed on the NYSE and Nasdaq hit new 52-week lows. Last week, as key market indices continued to hit new highs, a net 7% of NYSE and Nasdaq stocks made new 52-week highs, the most in six months.
CNBC data shows that for every stock hitting a new low on the Nasdaq Monday there were nine setting new highs.
"That's very bullish," said Ari Wald, Oppenheimer technical analyst, of the jump in new highs. "Historically, that's going to peak ahead of the actual S&P. If that's making new highs, that's the kind of broad-based internal breadth that signals a continuing trend ...The time to get concerned is when the S&P is making new highs and that's making less."
Wald said a positive sign for the market is the recent break out of microcaps.
"Usually at a meaningful market top, it will be the other way around. Internal conditions will weaken first. The market will start to sell small caps," said Wald. "It will get picked up in the benchmark S&P last. You'll see some narrowing of participation at the top."
In another bullish sign, advancing issues outpaced losers three-to-one on Monday. The NYSE had 241 new highs and 27 new lows, while the Nasdaq had 342 new highs and 62 new lows. Market volume for the exchanges Monday was 6.4 billion shares, which was above its 50-day average of 5.6 billion shares.
"It's a very bullish market we have on our hands. It's getting to be year two of the bull market that started in [December] 2018," Wald said, noting the second year on average has seen average gains of 11%.
"It's really a market firing on all cylinders. It's such a key point here. It's not just this narrowly focused large cap, growth story. We have Europe pushing to 20-year highs. The Euro Stoxx 600 is pushing to its year 2000 peak," he said.
Sentiment Trader said the jump in new highs is typically a good longer-term signal for more gains, but in the last two instances, the S&P pulled back over the next one to two months both times.
"When breaking out along with the S&P 500, this led to modestly positive medium-term returns, but the last two instances didn't amount to much for the bulls, as the S&P pulled back over the next 1-2 months both times. Mostly, this was a good longer-term signal," Sentiment Trader wrote.