Unusual technical indicator with perfect track record sends buy signal on US stocks

US stock bulls have a reason to expect the S&P 500’s bounce-back from a 19% decline will keep running strong: the Zweig Breadth Thrust.

This indicator, developed by technician Marty Zweig, identifies when there’s been an abrupt swing from negative to positive in the number of stocks on the New York Stock Exchange that are trending upward. Specifically, it’s triggered when the 10-day exponential moving average of the share of advancing issues on the NYSE moves from 40% or below to at least 61.5% in a period of 10 sessions (two weeks, in market time).

And on April 10, six sessions after the Rose Garden reciprocal tariffs announcement, this metric had deteriorated to 38%. It’s since rebounded to 61.7% as of Thursday’s close, marking a Zweig Breadth Thrust.

Ryan Detrick, chief market strategist at Carson Group, observed that this metric has been triggered 19 times since World War II, prior to Thursday, and that the S&P 500 has gone on to gain over the next 6 and 12 months every single time.

Thinking narratively about what can create these conditions:

Deteriorations in broad market momentum often coincide with (or are caused by) money flooding out of US stocks. A swift turnabout in breadth — whether it be from policy changes that improve the forward outlook or investors deciding that whatever scared them away from the market wasn’t as negative as they thought — can then lead money to chase these improved conditions. This is a particularly relevant point in an age where the amount of assets dedicated to trend-following strategies has swelled.

For instance, even in cutting his earnings per share and S&P 500 price target aggressively, Deutsche Bank’s Binky Chadha noted that equity positioning had come down sharply this year, “implying sharp rallies on any positive catalyst.”

On the one hand, I have some natural skepticism about trusting patterns where there are only a relatively small number of observations over time. On the other hand, I’ve had at least 19 thoughts this morning since I woke up and not all of them have been correct.