Rare event may send S&P 500 soaring
The S&P 500's rally off the lows on April 9 has been impressive and broad-based. Most stocks have participated in the move higher, including beaten-up technology stocks that bore the brunt of the post-tariffs early-month sell-off.
After President Trump unveiled worse-than-hoped reciprocal tariffs on April 2, so-called Liberation Day, the S&P tumbled 12% through April 8. The sharp and fast selling contributed to President Trump pausing most reciprocal taxes on April 9 for 90 days to negotiate deals with impacted countries.
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The potential for Trump to strike deals, resulting in lower tariffs, sent the S&P 500 surging 10%, despite very real risks remaining for the economy.
The S&P 500's rally has been so widespread that one particularly rare signal, the Zweig Breadth Thrust, developed by legendary investor Martin Zweig, flashed on Thursday, April 24.
A rare Zweig Breadth Thrust may signal higher stock prices in one year.Image source: Nagle/Bloomberg via Getty Images
A Zweig Breadth Thrust, explained
Martin Zweig was a successful investor who published a major stock market newsletter in the 1970s. He also contributed to Barron's and was a frequent guest on Louis Rukeyser's Wall Street Week, a must-watch TV show for investors in the 1980s.
Zweig is perhaps best known for predicting Black Monday in 1987, when stocks lost over 20% in one day, coining the phrase "don't fight the Fed," and his top-selling investment book, "Winning on Wall Street."
Related: Rich Dad Poor Dad author makes surprising silver, gold price forecast
He developed the Zweig Breadth Thrust after realizing that a shift from widespread selling to buying in 10 days or less had led to significant gains over the following year.
The Zweig Breadth Thrust triggered on April 24 is just the 20th since 1945, according to Carson Investment Research. The last time we saw one was near the S&P 500's low in November 2023.
In the past, the benchmark S&P 500 has produced gains 100% of the time one year later, with an average and median return of over 23%.
Zweig Breadth Thrusts are uncommon because they require a period of extremely broad selling immediately followed by extremely broad buying.
The measure is calculated by dividing a moving average of the number of NYSE stocks advancing by the total number of advancing plus declining stocks.
Initially, a ratio of 0.659 was considered a buy signal, while 0.366 was a sell signal. However, the indicator's buy signal has since been modified to be when the 10-day exponential moving average of stocks rises above 61.5% after being below 40% within the past two weeks.
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