Are you bullish on U.S. equities? You should be.
In addition to U.S. economic growth supporting higher equity markets, a number of market signals confirm the bullish setup for stocks. The S&P 500 is currently in what we call a “bullish trend” (i.e. a market environment that should cause the asset to rise over the next 3-months plus).
the Basic playbook for why U.S. equities can head higher:
Stocks ↑ + Volume ↑ + Volatility ↓ = Bullish Trend
As you can see in the brief video above, volume was up 10% yesterday versus it’s one-month average, continuing the general trend of increased volume on up days. (Basically, this confirms that a broad swath of people are buying when the market heads higher. Conversely, but similarly, a bearish signal is when volume accelerates on down days.)
Meanwhile, the CBOE Volatility Index (VIX), which shows the market’s forward-looking 30-day expectations of S&P 500 volatility, has fallen -27% in the past three months to 12.17.
What to Buy
Our proprietary algorithm suggests buying U.S. equities, as long as the VIX remains at the towards the middle to top-end of its immediate-term risk range of 13.39 to 10.16. On the flipside, a reading of VIX below 11 might signal it’s time to take some gains.
