- Two bullish indicators just flashed, suggesting a continued rally in the stock market, according to the Carson Group’s Ryan Detrick.
- Detrick highlighted better-than-expected first-quarter earnings and a rising 200-day moving average.
- “The vast majority of what we see continues to look quite positive and we expect more solid gains from stocks the rest of this year.”
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The stock market just flashed two bullish indicators that suggest the stock market could continue to rise in the second half of the year, according to a recent note from the Carson Group’s chief market strategist Ryan Detrick.
Detrick, who has been consistently bullish this year as the S&P 500 has rallied nearly 10%, remains steadfast in his view that the economy will avoid a recession and continue to surprise to the upside, in tandem with the stock market.
His conviction was bolstered recently after first-quarter corporate earnings came in better than analyst estimates, and as the S&P 500’s 200-day moving average began to move higher.
Here’s what Detrick is watching.
1. Corporate Earnings
With 95% of S&P 500 companies having already reported their first-quarter results, investors should be pleased.
Of the companies that have reported, 78% beat expectations. And while year-over-year profits are set to decline 2.2%, that’s much better than the 6.6% decline that analysts expected less than two months ago.
Meanwhile, the average company topped profit estimates by a whopping 6.5% and small-cap stocks beat their expectations by an even wider margin, according to Detrick.
“MSCI US trailing 12-month earnings have officially bottomed and are now heading higher,” he said, citing research from Ned Davis Research. “This is a very strong signal that all the worries about the impending recession have been greatly exaggerated and corporate America likely sees better times coming.”
2. The 200-day Moving Average
From a technical perspective, Detrick highlighted that the S&P 500’s 200-day moving average is beginning to trend higher after moving lower since April 2022.
The 200-day moving average is a long-term trend line that is calculated by averaging the closing price of the S&P 500 over its past 200 trading days.
“Right now, it’s rebounding off a bottom and that is another feather in the cap for bulls,” he said, adding that the 200-day moving average has a knack for catching significant trends.
For example, prior instances when the S&P 500’s 200-day moving average turned higher after moving lower for an extended period of time include July 2016, August 2009, June 2003, and March 1991 — all times when it proved fruitful to buy stocks despite the broader macroeconomic risks.
“The vast majority of what we see continues to look quite positive and we expect more solid gains from stocks the rest of this year, with an economy that will avoid a recession and surprise to the upside,” Detrick said.
Carson Group Detrick, who has been consistently bullish this year as the S&P 500 has rallied nearly 10%, remains steadfast in his view that the economy will avoid a recession and continue to surprise to the upside, in tandem with the stock market.