- This is the Zweig Thrust Indicator, which is extremely rare and has only been awakened 14 times since 1950.
- One analyst commented that every time the index has gone up, the S&P 500 has gone up the following year.
- “Definitely not a bearish sign, although it may not be immediately bullish,” added another expert.
There is an extremely rare bullish indicator that just lit up on Wall Street for the first time since 2019, which could mean that the rally that began in October could continue to go higher.
This is the Zweig Breadth Push Indicator and Carson Group Chief Market Strategist Ryan Detrick was the one who alerted investors to this.
How does the indicator work? It is calculated by taking a 10-day moving average of the number of advancing shares divided by the number of advancing shares plus the number of declining shares. The calculation derives a percentage, and when it falls below 40% and then rises above 60% in 10 days or less, the indicator is triggered.
Although the calculation is a bit confusing, the bottom line is that many stocks went from oversold to overbuy in a short period of time. This is what you tend to see at the start of new bullish phases,” Detrick commented.
The last time the Zweig Thrust Indicator was triggered was in early 2019. Before that, the indicator flashed in 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.
It should be noted that, since 1950, this indicator has flashed only 14 times, and each time the S&P 500 rose a year later. The expert added that the average yield at one year was 23%, while at six months it was 17%.
It should also be noted that on two occasions the indicator did not work in the short term but did work the following year: in 2004 and at the end of 2015.
The big rally last summer did not see a Zweig breadth push indicator, as that rally eventually faltered. So maybe this is another clue that this rally from the October lows is legitimate,” Detrick stated.
Mark Ungewitter, portfolio manager at Charter Trust, clarified that the indicator is not foolproof but it is definitely a good sign for bullish investors. “It is definitely not bearish, although it may not be immediately bullish”, He determined.
