New Highs Are Bullish and Breadth Is Strong

The S&P 500 finished February at a new high and made more new highs than in any other month since the summer of 2021

Key Takeaway: Complaints about the length of the new high list are misplaced. Net new highs provide the decisive signal and the trend there continues to rise.

Despite the wailing & gnashing of teeth about supposedly deteriorating breadth and in the face of lamentations over the percentage of S&P 500 stocks above their 50-day and 200-day averages pulling back from recent peaks*, the market did not fall apart in February.

Quite the opposite in fact. An increasing number of stocks participated in the rally and new highs persistently eclipsed new lows.

The S&P 500 (SPY) was up more than 5% on the month, while its equal-weight counterpart (RSP) was up slightly less (though the gain was a still respectable 4%+). Both finished February at their highest levels on record on a monthly and daily closing basis.

The closer we look, the better it gets:

• The S&P 500 made more new highs in February than in any other month since August 2021.

• For the first time since last summer, all eleven sectors were up on the month. 

• Nearly 70% of the stocks in the index gained ground in February. Fewer than half did so in January.  To make the math sound more exciting we can say that 50% more stocks moved higher in February than in January.

We take a closer look at the important and persistent improvement that is being seen beneath the surface.