A crucial shift is taking place in the depths of the stock market…

You won’t see it by just looking at stock prices. You won’t see it by only looking at the overall S&P 500 Index’s movement either.

Instead, you need to see whether more stocks are rising than falling. And once you do that, an important change comes to light…

Despite the market’s seeming downtrend, most stocks have stopped falling.

That shift began this year. It’s happening for the first time since the start of the bear market. And it reveals a crucial update for investors: The new bull market is here.

Let me explain…

Most folks simply watch the S&P 500’s movements to get a feel for how the market is doing. And most of the time, that’s fine. But in certain moments, you get an incomplete picture of the market’s health.

We’re in one of those moments right now.

That’s because what’s happening below the surface has diverged from the broader market’s movements. And that’s a strong sign that the bear market is over.

To see it, we’ll look at the advance/decline line for the New York Stock Exchange (“NYSE”). This cumulative indicator takes the total number of stocks that rose during the day and subtracts the number of stocks that fell. So the advance/decline line rises when more stocks go up than down over time.

For the most part, this indicator makes new highs and lows right alongside the S&P 500. But that doesn’t always happen…

These divergences often mark a turning point for the overall market. Just look at the chart below to see what I mean…

The stock market and the NYSE advance/decline line both hit new highs in November 2021. But when stocks hit another new high in early 2022, the advance/decline line was well below its high.

That divergence was an early warning sign for investors looking under the hood. It meant that more stocks were going down than up, despite a broad rally in the market. And that meant losses were likely… which is exactly what ended up happening.

Today, we have the opposite situation. Take a look…

The S&P 500 and the advance/decline line bottomed at the same time in October before rallying together into November. And then, in January, they diverged.

The January stock rally failed to break above the November high. But the advance/decline line did the opposite – and blasted through its November highs. That tells us something important about the current market…

More stocks are going higher than lower. And that means a major rally is likely on the way. Importantly, stock prices have backed this up in recent days.

The S&P 500 broke above that November high on February 1. And it has stayed above that level since then.

When you put it all together, we have a powerful signal that the next bull market is underway.

First, we had a positive divergence for the first time since the bear market began. That meant more stocks were going up than down. And we’ve seen the overall market follow through… breaking above a recent high for the first time since the bear market began.

I realize it’s scary to hear this. Investors have been beaten up, over and over again, for more than a year. But the new bull market is here. And that means the time to act is now. Don’t miss it.

Good investing,

Brett Eversole

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Source: Daily Wealth