LIVE MARKETS-Bulls bask in breadth thrust

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BULLS BASK IN BREADTH THRUST

Market chatter is increasing over burgeoning technical strength. Indeed, last week, the S&P 500 index posted three straight daily gains of more than 1.5%, which is something it hasn't done since 2020.

Additionally, last Thursday, a rare Zweig Breadth Thrust was triggered. This indicator was discovered many years ago by legendary market analyst Marty Zweig.

Basically, it strives to identify washout conditions followed by big time buying over a short period. It does this by taking a 10-day exponential moving average of the ratio of advancing stocks to the sum of advancing and declining issues.

When this measure thrusts from a sub-40% level to more than 61.5% in a 10-day period the signal is triggered.

Here is a chart of the NYSE composite .NYA along with these Breadth Thrusts since 2009:

According to Ryan Detrick, chief market strategist at Carson Group, the previous 19 times this has happened (back to WWII), prices were higher every single time.

Detrick's numbers show an average 12-month S&P 500 gain of 23.4%, and a median 12-month advance of 24.8%.

He adds that in the wake of the S&P 500 index gaining more than 1.5% for three days in a row, that future returns have also been especially strong.

Based on his data, one year later the S&P 500 index was higher 10 out of 10 times with an average rise of 20.7% and a median gain of 21.9%.

When looking at these stats, among other data points, Detrick says that the weight of the evidence suggests to him that the lows are in and stocks should trend higher over the coming months.

"No, we didn’t expect Liberation Day to be what it was and there is always a risk we could see something like that again, but the extreme breadth we’ve seen lately, coupled with some of the most bearish sentiment I’ve seen in my 26 year career, suggests investors should be open to better times," writes Detrick.

(Terence Gabriel)

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