The broadening stock market rally just flashed a super-rare bullish signal pointing to more big gains ahead
The Whaley Breadth Thrust indicator has a 100% success rate and has delivered an average one-year return of 23% for the S&P 500.
Spencer Platt/Getty Images
- A rare bullish stock market indicator just flashed, suggesting the S&P 500 rally will continue.
- The Whaley Breadth Thrust Indicator was triggered due to a sharp rise in stock participation.
- The indicator has a 100% success rate one year out, with the S&P 500 delivering an average return of 23%.
A super-rare bullish stock market indicator just flashed, and it's a signal that suggests that the S&P 500's 61% bull market rally that started in October 2022 has more room to run.
The Whaley Breadth Thrust ndicator was triggered on Tuesday after the S&P 500 saw a massive rise in breadth, or participation, of gains among its non-mega-cap-tech components.
It's the 15th time the indicator has flashed since the S&P 500's inception in 1950, according to data compiled by technical analyst Grant Hawkridge of AllStarCharts.
"The Whaley Breadth Thrust indicator is triggered when the number of five-day advancing stocks in the market exceeds the number of five-day declining stocks by about 3-to-1," Hawkridge explained on X.
In other words, this bullish indicator triggers when a stock market rally flips from extremely narrow to very broad in a short period of time.
The combination of a cool June CPI report, prospects for an imminent interest rate cut from the Federal Reserve, and the potential for a Donald Trump election win in November have boosted smaller-sized company stocks in a historic way.
The significance of the Whaley Breadth Thrust is that it has a 93% win rate looking six months out for the stock market, and a 100% success rate looking one year out.
Or put another way, the stock market has never been lower one year after the Whaley Breadth Thrust was triggered.
The indicator has delivered an average one-year return of 23% for the S&P 500, as well as an average six-month gain of 17.4%. Such a gain would send the S&P 500 to nearly 7,000.
"This is another not so subtle clue that stocks want to go higher. Yes, it is odd to see all of these breadth thrusts near all-time highs, as they usually happen at the end of bear markets. But we also understand they are triggering because so many stocks didn't really participate in the rally," Carson Group chief market strategist Ryan Detrick told Business Insider via e-mail on Wednesday.
The last time the Whaley Breadth Thrust signal triggered was November 3. Since then, stocks have surged nearly 20%. Before then, the indicator flashed in June 2020, January 2019, and September 2009.