Analysts pointed out that since 1970, the only time since 1970 that the three major technical indicators in the US stock market have shown a strong market outlook, suggesting that the stock market will have a huge rebound! And at the same time,S&P 500 Indexwill also be formed “goldcross”.
Tom Lee, director of research at Fundstrat, said a string of bullish news is flickering, which is solid evidence that a 20% rally in stocks may be imminent.
He pointed to three different indicators showing strength in market breadth, including “the Breakaway Momentum,” “the Whaley Breadth Thrust,” and “the Triple 70 Thrust.”
“The Breakaway Momentum” represents the ratio of the number of rising and falling stocks within 5 trading days, and is triggered when the number of rising stocks is twice the number of falling stocks; “the Whaley Breadth Thrust” is expanded to 10 trading days. It is triggered when it is higher than 1; “the Triple 70 Thrust” is triggered when the number of stocks rising for 3 consecutive trading days accounts for 70%; this index is the rarest and usually represents the beginning of a new bull market.
According to Fundstrat, when at least two of the above indicators show an increase in market breadth,S&P 500 IndexThe average gain over the coming year is 24%.
And triggering all three indicators at the same time might represent a very positive outlook for the stock market. It’s the only time since 1970, according to market research firm Quantifiable Edges, which called the phenomenon an “unprecedented trio.”
Tom Lee said, “The recovery in market breadth shows that demand for stocks is picking up. We know that investors will not be ‘risk-on’ in 2023. This all supports a stronger stock market in 2023.” “We think US stocks in 2023 may More like 1982, when the market just soared almost vertically.”
he thinks this yearS&P 500 IndexAt least a 20% gain, as it’s uncommon for the S&P to post flat or negative returns following a previous year’s decline. Since 1950, the S&P has risen more than 20% of the time 53% of the time following a full-year decline.
At the same time, the US stock market is regarding to see “gold“Crossover” also means that there is more upside in the future.
S&P 500 IndexThe 50-day moving average was only 26 points below the 200-day moving average on Tuesday (24th).Assuming that the gap between these two moving averages narrows at a rate of regarding 8 points per day, thenS&P 500 Indexexpected to appear this weekgoldCrossover, unless there is a sharp sell-off before then.
If true, it would beS&P 500 IndexFor the first time since the new crown epidemic in July 2020, “goldcross”. In July 2020, the stock index soared 52%.
But technical buy indicators can sometimes be false, with a 64% success rate, according to data compiled by The Chart Report.
Analyst Ian McMillan researchedDow JonesA total of 81 occurrences of the “Industrial Average” since its inception in 1896goldCrossover,” he found, on average, in “goldThe probability of rising three months following the “crossover” is 62%, with an average return rate of 7.33%; the probability of rising six months following that is 64%, with an average return rate of 10.65%.
Ari Wald, head of technical analysis at Oppenheimer & Co, emphasized that the moving average crossover signal is not perfect, explaining, “All big rallies start withgoldcross start, but not allgoldCrossovers can lead to big gains. “