Bull Market Behavior

We’re officially heading into what’s historically been the best three-month stretch of the year for stocks.

The market’s back in rally mode, with major indexes pressing against new all-time highs, and participation improving beneath the surface.

When looking for confirmation, I like to run through a few different risk appetite gauges.

One that’s been particularly telling lately is the ratio between high-beta stocks and low-volatility stocks.

Historically, when high-beta outperforms, it’s consistent with a healthy market environment — one where investors are willing to take on risk.

It’s in weaker environments where high-beta typically underperforms and money tends to rotate into low-volatility names.

If this ratio keeps trending higher, it’ll continue rewarding investors who own stocks — and punishing those who don’t.

Here's Tesla $TSLA, one of the top holdings of the Invesco S&P 500 High Beta ETF $SPHB, on the verge of completing a massive base.

Price has been hovering above the prior cycle highs from 2021, building pressure for what could be a powerful breakout.

If this thing goes, what do you think high-beta names will do?

To me, it all points to the same message: investors are embracing risk and setting the stage for a year-end rally.

Let me know what you think — what are you buying? I’d love to hear from you.

Stay sharp,

Alfonso De Pablos, CMT

Director of Research, All Star Charts