Nicolas Economou via NurPhoto
Takeaways
- Stocks triggered a Zweig Breadth Thrust signal on Thursday, a rare indication of surging market breadth that, over the last 80 years, has been a reliable predictor of the stock market's direction.
- Since the 1940s, the S&P 500—or its predecessor index before 1959—has averaged a 6-month return of 14.8% and a 12-month return of 23.4% after ZBT signals.
- Stocks have rebounded this week from their "Liberation Day" slump on optimism that the Trump administration is eager to defuse tensions with China.
Some market watchers claim that the stock market is about to hit a major milestone, which will lead to more gains.
Stocks on the New York Stock Exchange completed a Zweig Breadth Thrust on Thursday. A ZBT is achieved when the share of stocks that are rising increases from a Moving Average of less than 40 percent to more than 61.5% over a period of 10 days. This rare occurrence has only occurred 19 times in the past 80 years. It is considered an indication of a growing market momentum, driven by a bullish sentiment.
“This signal has been 100% accurate since WWII, with the S&P 500 higher 6- and 12-months later every single time,” according to Ryan Detrick, chief market strategist at Carson Group. Looking at the last 19 ZBT signals, the S&P 500 has averaged a 6-month return of 14.8% and a 1-year return of 23.4%, according to Detrick.
Stocks have recovered after their “Liberation Day’ slump amid optimism the White House wants to defuse tensions. This year, the administration imposed tariffs of 145% on China. The S&P 500 was up slightly on Friday after rising more than 1.5% in each of the last three sessions.
ZBT's Long-Term Record Is Spottier
Not everyone believes in ZBT’s power to predict. Technical analyst Tom McClellan in 2015 examined Breadth Thrusts for 1929 and 1934. He found that they are much less reliable bullish indicators.
The first sign of this period occurred in November 1930 and it did precede an upswing. McClellan wrote that the bullish effect of this signal wore off after a few months and the bear market returned. Four more Breadth Thrusts over the next 2 years failed to break through the bear market.
"It was only in April 1933 that there was finally a good signal that led to follow-on buying," McClellan said. The signal was followed up by two more in 1933, but they didn’t amount to much.
McClellan was writing in 2015, when a ZBT signal was triggered just months after stocks hit a record high. McClellan wrote: “I can’t offer much in the form of optimistic commentary regarding this current ZBT” signal, especially since it occurred at a time that appears to be early stages of a new downward trend.
Stocks did rise after that ZBT signal, but it was one of the weakest ZBT rallies on record, with the S&P 500 up just 1.4% and 7% over the next 6 and 12 months, respectively, according to Detrick's data.
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X Platform. “@RyanDetrick, April 25, 2025, 12:14 a.m. ET.”
McClellan Financial Publications "Zweig Breadth Thrust Signal."
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