The 2023 stock market rally kicked things up a notch last week, but can it continue? For investors wondering if the recent momentum could turn into a sustained move with substantial moneymaking opportunities, new data could provide some clues.
2023 Stock Market Rally Analysis
Eric Krull, co-author of "The Lifecycle Trade," analyzed the current stock market rally and compared the action to past market moves.
"It's the best it's been in over a year," Krull said on Friday's IBD Live show, referring to the 2023 stock market rally.
His research into rally attempts looked at market uptrends for the Nasdaq composite that began with a follow-through day and ended with an IBD "market in correction" call.
Krull found that on average, in the first 20 days after a follow-through, "moneymaker rallies" are up 5.5% on the index level and "life-changer rallies" are up 7.97% in that time period.
A moneymaker rally, according to Krull, happens when the Nasdaq is up 3% to 15% in a rally that lasts more than 15 days. A life-changer rally occurs when the Nasdaq is up more than 15% in a rally that lasts more than 15 days.
Krull says 25% of market rallies are moneymakers, while only 6% are life-changers.
As of Tuesday, we're on day 17 of the market rally. The Nasdaq is up 7.8% from its close on the Jan. 6 follow-through day through Monday's close. That could mean we're potentially in a life-changer market rally.
Despite the encouraging research, the future of the 2023 stock market rally could hinge entirely on how the rest of this week unfolds. More earnings reports from big cap tech stocks are due, in addition to fresh Fed headlines for the market to digest.
That could impact where the stock market rally stands at the 20-day mark, for better or worse. Watch the video embedded on this page for more details on Krull's research.
Market Rally: What Traders Should Do
Even with a pullback to kick off the week, the 2023 stock market rally is improving. Pullbacks are normal during uptrends, but they can also lead to further weakness on the downside. We don't yet have an "all clear" signal, so a methodical and measured approach is warranted.
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