- An incredibly rare bullish stock market indicator just flashed, suggesting big upside ahead.
- The Zweig Breadth Thrust indicator flashed on Friday after the S&P 500 saw its biggest weekly gain of the year.
- “All you need to know is since WWII, the S&P 500 is higher a year later every time,” Ryan Detrick said.
A rare bullish stock market indicator just flashed, and it’s a signal that suggests that the S&P 500’s bull market rally that started in October 2022 has more room to go higher.
The Zweig Breadth Thrust Indicator was triggered on Friday after the S&P 500 surged 6% in its biggest weekly gain of the year. This is the 18th time the indicator has flashed since 1945, according to data from Carson Group’s Ryan Detrick and Ned Davis Research.
The indicator, which was developed by investor and “Winning on Wall Street” author Martin Zweig, is calculated by taking a 10-day moving average of the number of advancing stocks divided by the number of advancing stocks plus the number of declining stocks. The calculation derives a percentage, and when it falls below 40% then surges above 60% in 10 days or less, the indicator is triggered.
“This rare signal is simply stocks moving from very oversold to overbought in less than two weeks,” Carson Group’s chief market strategist Ryan Detrick said last week.
When the indicator flashes, it “represents a sudden and swift improvement in breadth conditions after they have been beaten down,” StockCharts’ chief market strategist David Keller said on Monday.
The last time the Zweig Thrust Indicator triggered was in April of this year. Before then, the indicator flashed in January 2019, October 2015, October 2013, October 2011, and March 2009, just two weeks after the S&P 500 hit its generational low during the Great Financial Crisis.
The important takeaway for investors is that every time this indicator has flashed since 1945, it was followed up by massive gains in the stock market.
The S&P 500 delivered an average and median gain of 23% one year after the indicator flashed, with a 100% win rate. Gains were strong in the short-term too. The average three- and six-month gains after the indicator flashed were 8% and 15%, respectively, with a win rate of 77% and 100%.
“All you need to know is since WWII, the S&P 500 is higher a year later every time,” Detrick said.
If the S&P 500 delivers a one-year gains of 23%, it would send the index to an all-time high just under 5,400.
