This week’s featured chart shows why the recent rally in the stock market might have some legs.

The chart, shown above, is a “breadth thrust” indicator that measures the ratio of advancing stocks to declining stocks.

Specifically, it takes the ratio of the 10-day total number of stocks advancing in price to the 10-day total number of stocks declining in price. This ratio is shown as the orange squiggly lines on the bottom clip. The horizontal dashed line going across the middle represents the key level (a ratio of 1.9) that generates thrust signals that tend to be followed by above-average gains in the S&P 500 for periods of up to one year later.

In other words, when advancing stocks outnumber declining stocks by a wide enough margin over a 10-day period, it generally means a significant shift in market momentum has occurred, and further market gains tend to follow.

This is exactly what happened last Thursday, as highlighted on the chart. This was the first breadth thrust signal from this indicator since February 2021. This is significant because, on average, the S&P 500 (blue line, top clip) tends to gain roughly 17% over the year after one of these breadth-thrust signals. Something to keep in mind for the long term.


This is intended for informational purposes only and should not be used as the primary basis for an investment decision.  Consult an advisor for your personal situation.

Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.

Past performance does not guarantee future results.