U.S. stocks trigger a rare technical bullish signal, bullish in the medium term but short-term fluctuations are inevitable

According to the Zhitong Finance APP, the U.S. stock market wrapped up this week with a strong performance, but what truly boosted investor sentiment was a rare technical bullish signal triggered during Thursday's trading session, the Zweig Breadth Thrust. The emergence of this classic technical indicator is seen as an important signal that the U.S. stock market may enter a new upward cycle.

This week, the U.S. stock market was buoyed by President Trump's statements. He indicated that tariffs on China would be reduced from the current level of up to 145% and expressed no intention to dismiss Federal Reserve Chairman Jerome Powell, leading to a strong market rebound. Even more encouraging is that this round of gains was widespread, with almost all sectors participating in the rise, triggering the Zweig Breadth Thrust indicator.

This indicator was proposed by legendary investor Martin Zweig forty years ago, and its core idea is that when the market quickly recovers from a slump and rebounds broadly, it often signals a market bottom.

According to Dean Christians, a senior analyst at SentimenTrader, the indicator calculates the ratio of advancing stocks to the total number of advancing and declining stocks on the New York Stock Exchange, smoothed by a 10-day exponential moving average (EMA). A buy signal is triggered when this ratio jumps from below 40% to above 61.5% within 10 trading days.

Historical data shows that this signal is extremely rare but has a high success rate. Data indicates that since 1982, the S&P 500 has recorded gains within 12 months after the appearance of the Zweig Thrust signal, with a 100% success rate in 10 occurrences, and the maximum gain can reach double digits.

Nevertheless, technical analysts generally caution that investors should remain vigilant. Mark Newton, head of technical strategy at Fundstrat, stated, "While this signal may indicate that the April low has been established, weekly momentum remains negative, and the technical picture has not fully turned bullish."

Newton believes that from a medium-term perspective, this is a positive technical signal, but in the short term, volatility due to macro uncertainties such as tariff negotiations still needs to be faced.

Christians further pointed out that not all Zweig signals can be smoothly realized. For example, the stock market correction from 2015 to 2016 is a typical case. At that time, influenced by "growth panic," despite the appearance of the Zweig Thrust, the S&P 500 rose a maximum of 4.8% but then experienced a subsequent decline of over 9%

He believes that if a similar backtesting trend occurs today, the triggering factors may include failed trade negotiations or the deterioration of real economic data caused by initial tariff shocks, which in turn leads consumers and businesses to postpone investments and expenditures.

However, not all analysts agree that this is a "buying opportunity." Well-known market commentator and editor of the McClellan Market Report, Tom McClellan, pointed out that he does not believe this is a "golden example" of the Zweig signal.

McClellan stated that this wave of increase resembles a typical counter-trend correction in a "bear market rally," and "may soon fizzle out." He maintains a neutral view on short-term and medium-term trends but remains pessimistic about the long-term trend. "We are still in a bear market, and it is likely not over yet."

Regardless of the differences, the market performance has indeed warmed up. As of Friday's close, the S&P 500 index rose by 0.74%, the Dow Jones Industrial Average increased by 0.05%, and the Nasdaq Composite Index saw a rise of 1.26%, with all three major indices achieving four consecutive days of gains and recording impressive weekly increases