• S&P 500 in rally mode since mid-October 2022
• Branch Breadth Thrust indicator is ticking
• Accurate signal for a bull market
Driven by hopes that interest rate hikes will soon come to an end, the US stock market has risen so far this year – despite the bank tremors and fears of a recession. But how sustainable is this rally? A rare stock market signal that occurred recently could provide an indication of this.
bullish signal
The branch breadth thrust indicator has reappeared for the first time since 2019. This was pointed out by Ryan Detrick, chief market strategist at the Carson Group, on Twitter. In the tweet, he also highlighted the indicator’s impressive hit rate: it had previously struck just 14 times since 1950, and each time the S&P 500, which reflects the broad US stock market, was higher a year later, averaging over 23 percent.
The extremely rare branch Breadth Thrust just triggered.
It has only happened 14 other times since 1950 and the S&P 500 was higher a year later. every. single. time.
Up more than 23% on average a year later as well.
– Ryan Detrick, CMT (@RyanDetrick) April 9, 2023
What is Branch Breadth Thrust Indicator?
This technical signaller, which can be translated as “broad thrust indicator”, measures the strength or weakness of price movements in the stock market. The key figure sets the number of shares that have risen in the past ten trading days on a stock exchange – eg the NYSE – in relation to the number of all stocks listed there. A moving 10-day average value, given as a percentage, is determined from these ratios.
The indicator signals the start of a possible new bull market when it climbs from below 40 percent – indicating an oversold market – to above 60 percent – indicating an overbought market – within a 10-day period. That means nearly two-thirds of stocks are up on the NYSE over the past 10 trading days and only about a third are down. The idea behind this is that a sharply rising index value indicates that large funds have been shifted into shares within a short period of time and thus announces a “widespread boost” in share prices.
The Breadth Thrust indicator was developed in 1973 by US analyst Dr. Martin branch. According to Markets Insider, the branch breadth thrust indicator last struck in early 2019, and before that in October 2015, October 2013, October 2011 and March 2009. The financial portal also reports that several were already seen during last summer’s bear market rally Breadth Thrust Indicators observed, but none of them were the Branch Breadth Thrust Indicator.
Editorial office finanzen.net
Image Credits: Stuart Monk / Shutterstock.com, Mary Altaffer/AP