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90% Advancing Days Offer a Glimmer of Hope in a Corrective Market

After a two-day rally Friday and Monday, bears again were in charge and sent stocks lower Tuesday. The ranges in U.S. equities continue to be wide, and this will only likely be exacerbated when the Federal Reserve announces its interest rate decision and meets on Wednesday afternoon. Tarif news was light for a change, though the Trump administration continues to confirm that new tariffs will be levied in early April. Meanwhile, on the geopolitical front, President Donald Trump talked for over 90 minutes with Russian President Vladimir Putin as he tried to broker a peace deal between Ukraine and Russia. Details of the call were unclear at the time of this writing.

Though the trading environment continues to be difficult, bulls have three significant things working in their favor, including:

Back-to-Back 90% Advancing Days

One of the best ways togauge a potential market bottom is to look at breadth (participation). On Friday and Monday, we recorded back-to-back days when 90% of S&P 500 Index stocks advanced. Though such a signal is fairly reliable, Jason Goepfert (@jasongoepfert) crunched the numbers and drilled down further. When stocks record two straight 90% advancing days after hitting a 6-month low, the S&P 500 Index has been higher in every instance two months later (17 instances). In addition, the market is higher in ten of the past twelve instances using the 6-month and 12-month time-frames.

Zacks Investment Research
Image Source: Carson Investment Research, Ned Davis Research, @RyanDetrick

Post-Election Seasonal Pattern

Election seasonality correctly predicted that stocks would have a weak Q1. However, these same historical seasonality trends suggest that stocks tend to bottom in late March and rally into the summer.

Zacks Investment Research
Image Source: Hirsch Holdings, StockTradersAlmanac.com

Bullish Sentiment Craters

According to the AAII Bull/Bear sentiment survey, bullish sentiment recently reached the lowest levels (17.7%) since September 2022. In addition, for the first time in history, bullish sentiment has been below 20% for three straight week.s

Zacks Investment Research
Image Source: Investors Intelligence, Subu Trade

Finally, a key market area to watch moving forward is the “Magnificent 7” stocks, which have been renamed by many investors on Wall Street as the “Lag7” for their recent underperformance. That said, these mega-cap tech juggernauts still make up a large portion of the market and are often used as “hedge fund” hotels. Tesla ((TSLA - Free Report) ), the hardest hit of the bunch, is finally seeing some reprieve after an analyst upgrade this morning and a survey of 450,000 participants that said ~70% would buy a Tesla in a German poll. Meta Platforms ((META - Free Report) ) and Amazon ((AMZN - Free Report) ) are testing their rising 200-day moving averages – an area of potential price support. Meanwhile, names like Apple ((AAPL - Free Report) ) and Nvidia ((NVDA - Free Report) ) are below the moving average. However, NVDA was higher in early trade after CEO Jensen Huang’s keynote speech at the GTC global artificial intelligence conference yesterday.

Bottom Line

While the market navigates a complex landscape of geopolitical uncertainty, tariffs, and interest rates, the confluence of robust market breadth signals, historically favorable seasonality, and deeply depressed bullish sentiment offers a compelling narrative for future gains.

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