There's good reason to think that the 2-day surge in stocks this week wasn't just another bear market rally, according to Fundstrat

• There's good reason to think the two-day surge in stocks this week wasn't another bear market rally, according to Fundstrat's Tom Lee.
• The firm highlighted a "100% bid" day in the Nasdaq, a 10% decline in JOLTS, and stability in high-yield spreads.
• "The promising aspect is the job openings are falling but the unemployment is not rising," Lee said.

The stock market's back-to-back rally on Monday and Tuesday could be the start of a broader uptrend rather than a dead-cat bounce, according to Fundstrat's Tom Lee.

All major stock market averages added more than 5% in gains during the two-day surge, which was initially sparked by the UK government partially reversing tax cut plans that jolted its bond market last month.

Stocks pulled back on Wednesday. But according to Lee, there are many reasons to think that the stock market rally could be sustainable heading into year-end.

For starters, the most recent JOLTS data, which measures job openings in the US economy, showed its largest decline ever ex-pandemic, with a decline of 1.1 million, or about 10%.

That's good news for the Federal Reserve, as Chair Jerome Powell seeks to put a dent in the strong labor market to tame inflation.

"The promising aspect is the job openings are falling but the unemployment is not rising," Lee said, which is consistent with what a soft economic landing could look like.

Other strong signs suggesting the stock market rally could become more sustainable include: a 5% decline in the US dollar index, a near 50-basis-point decline in the expected May 2023 fed funds rate, and stability in high-yield spreads despite falling stock prices.

"US high-yield spreads did not make a new 'wide' last week, while equities closed at a new low. Historically, this divergence bears watching as this similar pattern emerged in comparing October 2008 vs March 2009," Lee explained.

Finally, breadth, or participation in the stock market, was incredibly strong on Tuesday. The Nasdaq 100 registered a "100% bid" day, meaning that every stock in the index was positive in Tuesday's trading session.

"Since 1996, this has only happened six times, and six of the six times the Nasdaq 100 is higher six months and twelve months later with average gains of 27% and 34%," Lee said. Additionally, a 100% bid day for the Nasdaq 100 has never happened during a bear market rally. "In isolation, this is very bullish," Lee said.