A rare bull market trailer appeared. A signal to buy a shares that never disappointed?

Until now, it worked almost every time and after its speech, the American S&P index gained an average of 23.4% in 12 months. Technical indicator Zweig Breadth Thrust (ZBT), because we are talking about it, lit up last week, causing a stir on Wall Street.

Zweig Breadth Thrust (ZBT) is a rare indicator in a technical analysis that is to signal the beginning of strong growth trends on the stock exchange. Developed by the legend of investing Martin Zweig, he tracks the percentage of growing actions listed on Nyse, in relation to all actions within 10 sessions. When the share of growing shares increases from below 40% to over 61.5% in 10 or fewer sessions, it is to be a sign that a wide stream of cash will flow on the market in the next year.

From 1943 to last week, ZBT sent a buy signal only 20 times. The penultimate once took place in November 2023. As showing historical statistics regarding previous 19 signals, after their appearance the S&P 500 index (or its predecessor before 1959) reached an average 6-month return rate of 14.8% and a 12-month return rate of 23.4%. Meanwhile, the median return was 13.2% (for 6 months) and 24.8% (for 12 months) – indicates the study of Carson Investment Research.

Supporters of the Zweig Breadth Thrust indicator indicate the truth that with each of the previous 19 times, when the signal appeared on the American stock exchange, S & P500 or its predecessor, they were at a higher level a year later. The signal legend is also built by the last series of his three great wins. ZBT was activated in July 2019, fitting into the later Covid reflection on the stock exchanges in 2020. 12 months after the S & P500 signal occurred by 27%.

ZBT did not disappoint in March 2023 and on November 2023. In these cases, after 12 months, S & P500 was 26.8% and 32.7% higher than when the purchase signal appeared. However, as some analysts indicate, there were several cases in the history of the American stock exchange when Zweig Breadth Thrust had its weaker moments.

Perfect indicators do not exist

In the note from the previous Friday, Senimentrader Dean Christians, senior analyst, indicated that the appearance of the ZBT signal during the inheritance trend on the market often indicates that a wider trend begins to reverse. However, this is not a smooth road to the tops. As he noted, history suggests that actions are usually higher than 6 to 12 months later, but short -term variability will probably persist, especially considering the persistent uncertainty about Donald Trump's duties.

Christians also pointed out that Zweig Breadth Thrust signals were not always a perfect prognostic. At this point, he paid special attention to the correction of American actions in 2015-2016 caused by concerns about maintaining economic growth, which in his opinion can be used as an analogy to the current market situation. After the appearance of the signal in August 2015, the S & P500 index lost up to 9%over the next 12 months. He finally finished this period by gaining 7%, but it was far from its average results.

The Sentimentrader analyst believes that the 2015 situation may be repeated if the United States achieve defeat in their new trade policy and security of contracts. Another threat could be a significant deterioration in macroeconomic data resulting from the initial tariff shock, which could lead consumers and the enterprise to delay the decision on expenses and investments – pointed out Dean Christians.

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