‘A game of catch and release’: Are recent stock-market rallies the beginning of a bull run?

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The U.S. stock market’s deteriorated breadth means rallies may be short-lived, according to Charles Schwab’s chief investment strategist Liz Ann Sonders.

“Even in the most brutal of bear markets, you get sharp, counter-trend rallies,” Sonders said in a phone interview Thursday. In her view, the stock market’s recent moves higher, like the one leading into Memorial Day Weekend, seem more like “a typical bear-market rally than the start of something new and prosperous.”“Even in the most brutal of bear markets, you get sharp, counter-trend rallies,” Sonders said in a phone interview Thursday.

“Ideally, we want to see a very elevated percentage of stocks rallying together to feel more confident,” Sonders said in the note. While the percentage of stocks trading above their 200-day moving averages recently ticked up, “early stages of sustainable bull moves are typically marked by broader ‘breadth thrusts.’”

The S&P 500 SPX closed 1.8% higher Thursday at 4,176.82. That’s below its 50-day moving average of 4,255.87 and its 200-day moving average of 4,451.63, according to FactSet. In a separate note Thursday, Liz Young, SoFi’s head of investment strategy, said she wants to see more signs of “breadth and strength” in the stock market before being persuaded that recent rallies are signaling that “we’re out of the woods.”

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