Analysts promise growth in the S&P 500 index in the coming year
The stock market is experiencing an unusual dynamic linked to activating a special indicator. This is the Breadth Thrust indicator, the activity of which indicates the growth of the S&P 500 index.
This indicator is a bullish signal indicating that the index’s growth has a good chance of accelerating. Breadth Thrust came after the S&P 500 rose 6%, its biggest gain in a year. According to Carson analysts, this indicator has only occurred 18 times since 1945.
Investor Martin Zweig created Breadth Thrust. The algorithm for the calculation of the signal is as follows:
– a moving average calculates the number of stocks that rise in price over 10 days;
– the number of rising and falling stocks is added together;
– dividing the first value by the second.
The indicator is activated if the resulting percentage falls to 40% or less and rises to 60% after 10 days. The signal indicates that the stock has changed its status from oversold to overbought in less than 14 days. Breadth Thrust’s activation suggests a potential strengthening of the current uptrend.
What does the appearance of the signal indicate?
The indicator last made itself known in April 2023; before that, it appeared in 2019 and 2015. The signal also activated in the spring of 2009, just 14 days after the S&P 500 fell to its lowest level due to the financial crisis.
In the case of Breadth Thrust, analysts pay special attention to the fact that in all cases, after the activation of the indicator, there was a sharp growth spurt on stock exchanges. According to the research, 12 months after the signal activation, the S&P 500 index showed an average increase of 23%. Moreover, growth was rapid but not prolonged: the average increase for 3 months after the jump was 8%, and for 6 months – 15%. The gain rates were 77% and 100%, respectively.
Analysts emphasise that the S&P 500 has consistently risen since introducing the indicator. Therefore, the experts expect the index to increase by 23% in the coming period and to reach 5400 – almost a record high.
All this bodes well for the stock market and the stocks included in the S&P 500. However, analysts’ forecasts so far only concern this index. Whether there will be a change in the dynamics of other indices is still unknown.
