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Data released on Wednesday revealed that U.S. consumer price inflation rose by 0.6% in August, marking the most significant monthly increase in 14 months and aligning with forecasts. Core inflation, which excludes food and energy prices, saw a slight uptick of 0.3% in August, slightly above Wall Street’s expectations.
However, Krinsky noted in his Wednesday note that the current market conditions do not suggest a repeat of the rally that began last year when the S&P 500 was 14% below its 200-day moving average. The index is now 7% above its 200-day moving average.
The gauge of large-cap U.S. equities had hit a cyclical bottom at 3,577 in October 2022, according to FactSet data. Since then, the S&P 500 has gained 25%.
Despite these gains, the percentage of S&P 500 components above their 200-day moving average was only 48% as of Wednesday. This figure is well below the historical average indicating limited market breadth – a measure of how many stocks are participating in a move.
Krinsky highlighted that since 1990, the average reading of such a metric 11 months after a major low has been around 76%. He expressed skepticism about the current market trends stating, “The current landscape is either the slowest/ weakest start to a new bull we have ever seen, or it’s one of the longest/strongest bear market rallies we have ever seen. We side more with the latter and do not expect today’s move to result in anything like what we saw 11 months ago.”
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