Buying great companies regularly and keeping a cool head has proven to be a time-tested winning formula in the markets.
That said, every now and then, it’s worth paying attention when a technical signal with a track record like this flashes green.
Last week, the market delivered something truly rare: the triggering of the Zweig Breadth Thrust. If you’re a bull, you’ll want to know what that means and why history suggests it could be a very good sign.
Key Points
- A rare Zweig Breadth Thrust just triggered, historically leading to strong stock gains (~25% over 12 months).
- It typically signals the end of corrections, and the April 24 trigger fits that pattern.
- Despite the bullish history, risks like recession and tariffs suggest steady dollar-cost averaging remains the smartest move.
What is This Unusual Signal?
The Zweig Breadth Thrust, developed by famed investor Martin Zweig, is a technical indicator that looks for a sudden shift in market momentum.
Specifically, it measures the 10-day exponential moving average of advancing stocks compared to the total number of stocks. A thrust is triggered when that average surges from below 40% to above 61.5%, all within just 10 trading days.
In plain English it signals that a market, previously weak and battered, has suddenly flipped to strong, broad-based buying before stocks have gotten too overheated.
And here’s the kicker, over the past 80 or so years, every single time this thrust has been triggered the S&P 500 has been higher six months and one year later. The median gain? Up just shy of 25% over twelve months.
Not bad at all.
Why It Matters Now
According to Carson Investment Research and Ned Davis Research, the most recent thrust was triggered on Thursday, April 24, the first since November 2023.
And these events aren’t common. Historically, they happen about once every four years. The last time a thrust hit was just after a major market correction, a pattern that matches the correction we’ve seen in the past few months.
In the past, when the Zweig Breadth Thrust triggered, it usually signaled that the worst of a market correction or bear market was behind us. Stocks generally moved higher, often significantly.
So if you’ve been sitting on cash, waiting for a clearer picture to emerge amid tariff headlines and recession fears, this might be a reason to start putting some of that money back to work.
But… Will The Pattern Persist?
Of course, no indicator, even one with a perfect record, can see the future. And the times were different before, such as when after deep, months-long bear markets had already played out.
Today’s environment is still a little murkier. Wall Street is split on whether we’ll dip into a recession later this year. And while the stock market action suggests optimism (perhaps expecting a soft landing or just a “growth scare” like we saw in late 2018), uncertainties around tariffs and tight Federal Reserve policy still loom large.
Yes, the administration recently announced a “pause” on new tariffs to allow more trade negotiations, but even in a best-case scenario, tariffs are likely to stay higher than they have been in the past. That could still create headwinds for growth.
What Should You Do?
The Zweig Breadth Thrust is a rare and powerful technical signal that historically has been a very bullish sign for stocks.
But while history leans in favor of a rally, it’s smart to remember: no single indicator is infallible. The smartest strategy is still the simplest one, dollar cost average, just like the Sage of Omaha.