Piper Sandler's Craig Johnson on Market Indicators and Small Cap Stock Rally

Contrarian Indicators and Market Sentiment

• 💡 When technical indicators like the percentage of stocks below their 40-week moving averages reach historically low levels (approaching single digits), it signals a contrarian opportunity to lean into the market.
• ⚠️ Despite widespread negativity and calls to sell, these extreme readings in the past have preceded market upturns.
• 📈 Even with current market gains, there remains significant negativity, with some bond traders advocating for selling, which Johnson views as another contrarian indicator.

Small Cap Stock Performance and Market Outlook

• 🚀 Small cap stocks, particularly the Russell 2000, have experienced a significant rally, which is a constructive sign for market broadening.
• 🎯 While a new market high was not reached by the initially projected date, Johnson still anticipates this will occur, likely in the fourth quarter, potentially November to December.
• 📊 Constructive base formations are being observed across various sectors within small-cap companies, including industrials, financials, and tech, suggesting further upside potential.

Broader Market and S&P 500 Objective

• 🎯 The S&P 500 is nearing its year-end objective of 6,600, with only about 2% remaining.
• 📌 This current level is viewed as a "pit stop" rather than a final destination, implying continued market movement beyond the objective.