The stock market is in the midst of a very strong rally right now. And according to one ultra-rare stock indicator with a 100% historical track record, the party is just getting started.
Two weeks ago, the stock market had a “golden week,” when it rallied every single day the market was open. Then, stocks continued to rally the following Monday, Tuesday and Wednesday, notching an eight-day winning streak – the longest in over two years. That streak broke on Thursday, but stocks rebounded with vigor on Friday in one of their most powerful rallies of the year.
This upward momentum has been so strong that it triggered an ultra-rare technical indicator that only flashes when the market is just starting a huge rally.
That indicator is called the Zweig Breadth Thrust (ZBT), one of the rarest and most powerful breadth thrust indicators out there.
It is calculated by taking the 10-day moving average for the percentage of advancing stocks on the New York Stock Exchange. And it’s triggered when that ratio rises from ~40% to ~60% in just 10 days.
In essence, the Zweig Breadth Thrust is only triggered when the market pivots from very oversold to very overbought in less than two weeks. That is a very rare phenomenon. In fact, it’s so rare that since World War II, it has only happened 17 times.
And a ZBT signal was just triggered for the 18th time in history.
The Zweig Breadth Thrust: Quite the Bullish Indicator
All 17 prior times this indicator was triggered, stocks were higher six and 12 months later 100% of the time.
Average six-month forward returns? About 15%.
Average 12-month forward returns? More than 23%.
In other words, this current stock market rally is so powerful and widespread that it has triggered an ultra-rare technical indicator that strongly suggests stocks will rally 20%-plus over the next 12 months.
And, in fact, there’s even more…
Because this is actually the second Zweig Breadth Thrust this year – and that makes the historical precedent even more bullish.
We saw a ZBT in late March and then another here in November. That means we’ve seen two Zweig Breadth Thrusts in less than 12 months.
We’ve only seen two in less than 12 months twice before: 1962 and 1974/75.
Following the second ZBT signal in 1962, stocks rallied 25% over the next 12 months.
And after the second ZBT signal in 1975, stocks rallied 29% over the next 12 months.
In other words, the fact that this is the second ZBT signal in 12 months very strongly suggests that we’re looking at a huge stock market rally in 2024, likely on the order of 25%-plus.
The Final Word
Of course, these days, most people are asking: How could the stock market be rallying while several wars are underway, inflation is running hot, interest rates are at nosebleed levels, and the U.S.’ political environment is as divided as it has been in decades?
Well, there’s an old saying on Wall Street that is ringing true right now. Bull markets are born on pessimism and grow on skepticism.
And it seems all we have right now is pessimism and skepticism.
That’s a recipe for a bull market.
When everyone is pessimistic and fearful, like they are today, it’s time to be greedy.
That’s exactly why the smart money is being greedy and pouring money into stocks right now.
So, ignore this rally at your own peril.