Breadth Thrust has appeared: Is there a 100% signal for U.S. stocks to rise?
The U.S. stock market has recently shown breadth thrust signals, with the S&P 500 Index confirming its 32nd signal. A breadth thrust indicates a shift in market breadth from weak to strong in the short term, characterized by the ratio of advancing stocks to total stocks rising from below 0.40 to above 0.615. Since 1939, the probability of an increase after 130 and 190 trading days following the signal has been 100%, with average gains of 17.1% and 19.6%, respectively. The probability of an increase after 250 trading days is also 100%, with an average gain of 21.3%. This signal has strong predictive power for medium-term trends
Recently, the market has been buzzing about the significant increase in the breadth of the U.S. stock market, and Bank of America Merrill Lynch has specifically compiled data on this.
On April 24, the S&P 500 index confirmed its 32nd breadth thrust signal. Breadth thrust refers to the market breadth shifting from weak to strong in a short period, specifically manifested as the ratio of the number of stocks rising above the 10-day moving average to the total number of advancing and declining stocks (Advances / (Advances + Declines) rising from a weak level below 0.40 to a strong level above 0.615.
Since 1939, the performance of the S&P 500 index following breadth thrust signals has been outstanding. The probability of an increase after 130 trading days and 190 trading days is 100%, with average gains of 17.1% and 19.6%, respectively. Since 1943, the probability of an increase after 250 trading days is 100%, with an average gain of 21.3%. This indicates that the breadth thrust signal has strong predictive power for the mid-term trend of the S&P 500 index.
However, this indicator performed poorly before 1939.
