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 Grizzly bear relaxing on a rock on a hot summer day at the zoo 
 
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Last weekend I presented a 2001 chart of the S&amp;P 500 and wondered whether a similar rally was now possible after a similar five-week losing streak for the S&amp;P. In 2001 the S&amp;P had declined 27.9% before an impressive 21.7% rally (see chart) that lasted seven weeks.


As stocks were bottoming in April 2001 the sentiment was quite negative as indicated by this article from the NY Times. The bullish % from the American Association of Individual Investors had dropped to 27.8% before the S&amp;P 500 started to turn higher. In 2001, the market rally was given an additional boost by an unexpected rate cut by the Federal Reserve.

The rebound peaked on May 22nd as the monthly R1 was slightly exceeded. As is often the case the rally lasted long enough to change the sentiment as on May 24th, 2001 the bullish % had risen to 61.9%. This level was not exceeded until May of 2003.


For many weeks I have been pointing out the very low bullish readings from both individual and institutional investors. This was despite the signs that the economy was still growing which meant that the odds favored a sustainable rally. Lo and behold last week was the start of the long-expected rally. 


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 Tom Aspray - ViperReport.com 
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Every market was higher last week led by over 7% gains in the Nasdaq 100 ($NDX) and Dow Jones Transportation Average ($TRAN). Even though there was an impressive gain, the $NDX is still down 22.3% year-to-date (YTD) while the YTD loss in the $TRAN is 12.8%.

It was also an impressive week for the S&amp;P 500 as it was up 6.6% after being down over 20% on May 19th. It failed to close in “so-called bear market territory”. The iShares Russell 2000 also had a good week, gaining 6.6% and even the more defensive Dow Jones Utility Average rose. 4.4%.


The question now for many individual investors as well as the market pros is whether this rally can continue and ultimately whether it is the resumption of the major bull market or just a bear market rally?
There were signs from last Tuesday’s close that the market was starting to look more positive and the closing A/D numbers on Wednesday “created new uptrends in the daily A/D lines’ (see Tweet). This was enough of a reason for traders to buy.
The market internals were even stronger late in the week as the NYSE advancing stocks led the declining stocks by a 6 to 1 ratio on Thursday and over 4 to 1 positive on Friday. In addition, on Friday 92.2% of the S&amp;P 500 stocks advanced and 94.4% on the Nasdaq 100. The weekly numbers were even more impressive with 3137 Advancing and 443 Declining issues.
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 Weekly A/D Analysis 
 
 Tom Aspray - ViperReport.com 
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Even with those strong numbers, I was a bit surprised to see that the weekly S&amp;P 500 Advance/Decline line had broken the downtrend, line a, at point 1. If the April high was overcome it would typically signal that the correction is over and that the intermediate-term trend had resumed. If the S&amp;P 500 A/D line makes a new all-time high it would also be a bullish sign for the major trend. In February 2019 all of the key A/D lines made new highs and started leading prices higher.
In early 2019 the weekly S&amp;P 500 A/D line also broke through resistance (see chart) after the S&amp;P had dropped 19.8% making its low on December 24th. In early 2019, the NYSE Stocks Only A/D line was just as strong as the S&amp;P 500. It closed Friday above its EMA but it is still below the downtrend, line b.
The NYSE All A/D line was as strong as the S&amp;P 500 A/D line in early 2019 but that is not the case now. It closed the week below its EMA and is still well below the downtrend, line d. That indicates that common stocks are not yet as strong as the S&amp;P 500 stocks.
The Spyder Trust (SPY 
 
 PY 
 
 
 SPY 
 ) has next resistance in the $418-$420 area and then at $430. A close above the March 29th high of $461.20 would be a strong sign that the bull market was alive. 
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 QQQ Weekly 
 
 Tom Aspray - ViperReport.com 
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The weekly chart of the Invesco QQQ 
 
 QQQ 
 Trust (QQQ) shows that the 38.2% resistance from the November 2021 high is at $329.30 with the declining 20 week EMA at $334.10. There is more formidable resistance at $344.46 which is the 50% retracement resistance level. The late March high was $371.83. 
The weekly Nasdaq 100 Advance/Decline line closed the week above its declining WMA but is still below the downtrend, line a. A strong close above this resistance and the March high (see arrow) would be a strong sign that the intermediate-term trend had turned positive. Conversely, a rally failure below the March high would be consistent with a bear market rally. 
Given the current data, it is too early for me to conclude that the stock market has made an important bottom. The high level of bearish sentiment over the stock market, economy and inflation are consistent with an important market bottom. The technical evidence could get stronger in the next week or so.
Many stocks have already had recession level declines and many already are doubting that the market has made an important low. This is likely to be this week’s focus in the financial press. As long as we do not see a sharp downside reversal this week I expect this rally to last through June and go further than most expect.
Over the short term, I expect that any pullbacks could be brief but after last week’s action, some weakness is needed to lower the risk on new long positions. As the rally progresses it will be more important to monitor both the daily advance/decline lines as well as the sentiment so you will be alerted to early warning signs if the rally starts to weaken.
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The question for individual investors and market pros is whether this rally can continue and ultimately whether it is the resumption of the major bull market or just a bear market rally? The Viper Report’s Tom Aspray shares his market analysis after last week’s rally.

Is The Bull Market Alive Or Is The Bear Just Taking A Nap?