In late May, I wrote an article showing you exactly what a dying bull market looks like.
The idea was simple: In the last great "Melt Up" in stocks – from 1998 to 1999 – something interesting happened...
While the main stock indexes were rising in 1999, most stocks were actually falling in price. And this went on for months.
That was an ominous sign. In 1999, we were in a dying bull market.
Don't get me wrong. You can still make a lot of money in the final stages of a bull market. Often, the biggest gains come in these final stages. That's what happened in the last few months of 1999.
The thing is, you have to keep an eye on the health of the market. Think of us as the doctor and the stock market as our patient.
Today, I'll update you on our patient's health...
The news is good.
Even though we're a long way from May, the patient is as healthy as he was back then.
Specifically, the number of rising stocks is still greater than the number of falling stocks. (This is called the advance/decline line. You simply add the number of winners and subtract the number of losers.)
Take a look...
This is what a "healthy" boom looks like. It's no guarantee that stocks will keep going higher, but it does tell us that the rally is "broad" – across most stocks.
As a reminder of an "unhealthy" boom, let me share with you what happened during the final stages of the last great bull market in 1999.
As you can see in the chart below, more stocks were falling than rising. Take a look...
The massive divergence in this chart was a clear warning sign for stocks.
The majority of stocks had stopped moving higher. And the final Melt Up gains all happened in what was overall a weak market.
This isn't happening yet. Stocks are still broadly moving higher. So we're not in a dying bull market... yet.
Importantly, stocks can still soar even after the advance/decline line breaks down.
The last Melt Up occurred entirely after this measure began to fall. Said another way, we'll likely see the biggest gains when the overall bull market is at its weakest.
There's no guarantee of that, of course. But our best guide to what will happen is what happened last time.
This simple measure tells us the bull market is still strong today... And the biggest gains are still ahead of us. So my advice is simple: Stay long.
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This article originally appeared on Daily Wealth.