The Zweig Breadth Thrust indicator just flashed a buy signal for the S&P500 (SPY) after the 10-day EMA rose above 61.5%.
The indicator has a perfect track record since 1950 with 100% positive returns six and 12 months after each signal.
Past surges have generated average S&P 500 gains of 23.3% one year after the signal out of 20 occurrences.
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The stock market continues to send investors contradictory messages, mixing signs of resilience and suspicions of fragility. Economic data shows robust corporate profits, but a weak labor market, inflation and interest rate concerns and geopolitical tensions have triggered bursts of selling.
Investors face a dilemma: invest new capital in stocks amid record highs, or turn to bonds and cash for protection? Barely a week ago, the S&P500 looked poised for a 10% correction, with a narrowing in breadth and an increase in volatility. But over the past seven days, the trend has reversed sharply, climbing 4% and bringing year-to-date gains to 15%. This whiplash left many people on the sidelines, calling into question the sustainability of the gathering.
Yet a rarely discussed indicator is about to activate, signaling that a major bull market is about to break out. For over 70 years, it has delivered impeccable results – it has never been wrong.
The Zweig Breadth Thrust Indicator was created by investor Martin Zweig in the 1970s. It tracks market participation beyond major indexes like the S&P 500. It uses daily data on the rise and fall of stocks in the market. New York Stock Exchange. The formula calculates a 10-day exponential moving average (EMA) of the ratio: advancing issues divided by (advancing plus declining issues). This gives a percentage reflecting the number of stocks that join the uptrend.
A “surge” is triggered when this EMA moves from below 40% – indicating widespread selling and an oversold state – to above 61.5% within 10 trading days. This rapid change reflects an increase in buying pressure, where pessimism turns to optimism almost overnight.
Zweig designed it to spot the start of sustained recoveries, because broad participation often fuels advances over several months. Unlike price-based tools, it emphasizes underlying health: if only a few mega-caps generate gains, momentum remains dormant.
Now the indicator is flashing, a buy signal is imminent. Breadth dipped below 40% during the mid-November decline, with declines outnumbering gains four to one on the tough days. But a four-day rally flipped the script: the 10-day EMA fell just below 60%. There have only been around 20 surges since 1950, following signals in April and October 2023, and earlier in 2025.
Such rarity underlines its power. Since 1950, surges have preceded average S&P 500 gains by 1.3% after one week, 2.4% after two weeks, 3.9% after three weeks, 5.1% after one month, 6.8% after two months, 9.1% after three months, 14.6% after six months, and 23.3% after one year.
Every case – 100% of them – saw positive returns at six and 12 months. Bull markets often start from these points: the 1982 surge marked the start of a 20-year expansion, while the 2009 surge sparked the post-crisis boom.
For the market, this implies a broadening of dynamics. Tight leadership from tech giants like Nvidia (NASDAQ:NVDA) could give way to sectors such as industrials and consumer goods joining the party. Expect short-term disruptions – historical charts show pullbacks of 20-30% in the first year following the signal – but the trajectory is pointing upward. During the double-surge year of 2023, the S&P 500 index rose 24% despite mid-year swings.
Investors clearly gain an advantage. Investing rewards patience: deploying capital at the signal achieves an average increase of 23% year-over-year, far outpacing buying and holding during periods of stagnation. It filters out the noise of the headlines, focusing on collective behavior.
However, risk management remains essential: do not pour all the money in your portfolio into the market at the same time, otherwise you risk overexposure. For those holding defensive assets, this is a signal to return to stocks, as cash flows.
I would say investors should consider buying stocks soon. The Zweig signal’s perfect history suggests that a major bull phase is coming, leading to significant gains likely through 2026. Target the S&P 500 through low-cost exchange-traded funds (ETFs) like SPDR S&P 500 ETF Trust (NYSEARCA: SPY) or the Vanguard S&P 500 ETF (NYSEARCA: VOO) provides simple exposure to this rise, capturing the index’s historical average return of 23% after a surge signal.
There is one caveat, however: the current signal would be the first time the indicator has signaled that the market is within 5% of its all-time high. This represents an unprecedented high valuation backdrop, potentially testing the reliability of the signal reversal.
Nonetheless, a good argument can be made for always adding money to your portfolio to take advantage of dollar-cost averaging and reduce market timing risk. The monthly commitment of fixed amounts mitigates volatility and guarantees participation regardless of entry point. This approach has steadily increased wealth, turning market declines into opportunities – for the next bull market to come to life.
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