Steenbarger: S&P 500 shows very impressive breadth

The S&P 500 rose 2.6 percent last week, its second consecutive weekly gain, to a record high.

Brett Steenbarger wrote in a Forbes article that market highs have been accompanied by a high degree of investor optimism.

Steenbarger noted that the most recent survey of the American Association of Individual Investors showed that 49.4 percent of respondents were bullish, well above the historical average of 38.0 percent. 23.5 percent of investors were bearish.

While extremes in investor optimism often precede a peak in the market, Steenbarger also noted that market breadth remains strong, with more than 80 percent of stocks in the S&P 500 above their 10-day moving averages and 80 percent above their 200-day averages.

“What this means is that the great majority of shares have been strong on both a short-term and longer-term basis—very impressive breadth,” he wrote. “Going back to the start of my database in mid-2006 (over 3600 trading days), we find only 135 days with similar breadth extremes on a 10- and 200-day basis.”

“On average, it is difficult for the overall market to roll over when the great majority of individual stocks are displaying strength,” he concluded.