The stock market is always full of surprises, but one rare bullish indicator has just flashed, suggesting that the S&P 500’s rally is far from over. The Whaley Breadth Thrust Indicator was triggered recently, indicating a sharp rise in stock participation among non-mega-cap-tech components of the S&P 500.
What exactly is the Whaley Breadth Thrust Indicator? This 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. In simpler terms, it shows a shift from a narrow market rally to a broader one in a short amount of time.
According to technical analyst Grant Hawkridge of AllStarCharts, the Whaley Breadth Thrust Indicator has a 100% success rate one year out, with the S&P 500 delivering an average return of 23%. This means that historically, the stock market has never been lower one year after this indicator was triggered.
Interestingly, the current trigger of the Whaley Breadth Thrust comes amidst a cool June CPI report, expectations of an interest rate cut from the Federal Reserve, and the anticipation of a potential Donald Trump election win in November. These factors have led to a historic surge in smaller-sized company stocks.
Ryan Detrick, chief market strategist at Carson Group, pointed out that despite the unusual timing of the indicator flashing near all-time highs, it is a clear sign that stocks are poised to go higher. The last time this indicator triggered was in November 3, and since then, stocks have surged nearly 20%.
The Whaley Breadth Thrust indicator has previously flashed in June 2020, January 2019, and September 2009, each time leading to significant gains in the stock market. With the current average one-year return of 23% for the S&P 500 after this indicator, it’s no wonder why investors are paying attention to this rare and reliable indicator.
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