US stocks can be expected to continue to rally to new highs as internal breadth points to further strength, says Ari Wald at Oppenheimer. Internal breadth, as measured by the NYSE Advance/Decline line, typically peaks before the index, having done so in 12 of the past 15 market tops. This usually occurs some 5 months before the market begins to turn.
Moreover, lagging sectors are now also rallying to support the index, most notably, consumer staples. However, participation, as measured by the % of stocks in the index above their 200-day moving average, has yet to pass the critical 60% mark, whereby the rally would be “confirmed, adds Wald.