‘Extremely rare’ stock market signal flashes with 100% accuracy rate and points to record highs in 2024

'Extremely rare' stock market signal flashes with 100% accuracy rate and points to record highs in 2024

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  • The stock market is likely to see record highs in early 2024 after an “extremely rare” signal appeared.

  • That’s according to Ryan Detrick, chief market strategist at Carson Group, who highlighted another sign that breadth is improving.

  • “We continue to expect the stock to perform well and remain an overweight to the stock,” Detrick said.

An “extremely rare” signal has just appeared in the stock market, suggesting to Ryan Detrick, chief market strategist at Carson Group, that record highs are imminent.

Detrick highlighted in a note on Thursday that more than 60% of all S&P 500 components reached a new 20-day high last week. This flies in the face of the idea that big tech companies drive the bulk of gains in the stock market.

“Last week, we saw a very rare range widening, which suggests many stocks are rising, which tends to be a signal of impending strength,” Detrick said. “This is very rare and shows a lot of buying has been happening recently, and not just in a few large stocks.”

Since 1972, this rare signal has flashed 15 times, not counting last week’s signal. The S&P 500 was higher a year later 100% of the time after the signal flashed, generating an average return of 18%.

If a similar gain occurs over the next year, the S&P 500 would trade at just above 5,400, exceeding even the most bullish stock market expectations.

The S&P 500 is back

Carson Collection

Detrick highlighted that there have been other bullish signs in the stock market in recent weeks, including the S&P 500 rising 8.9% in November, marking its best 18 month ever.

When measuring the S&P 500’s best 20 months of performance, stocks were higher 80% of the time in the following year, with an average gain of 13%. When counting the 30 months in the S&P 500’s history when gains were at least 8%, stocks continued to rise 90% of the time in the following year.

“Again, this suggests that the strength we just saw was likely the beginning of more strength, not the end,” Detrick said.

Finally, he pointed out that the S&P 500 has not reached a record high since January 2, 2022, nearly two years ago. With stocks less than 5% away from new highs, Detrick said he expects a record high to be reached in early 2024, and if that happens, it would be another bullish sign.

“In earlier times, stocks went at least a full year without new highs and then hit one, and future returns were very strong. In fact, stocks rose 13 out of 14 times the following year, rising 14.9% on average.” After long periods without a high, “a new high and then eventually reaching a high,” Dietrich explained.

When combined with the “extremely rare” technical breadth signal that flashed last week, all signs point to a continuation of the bull market into 2024.

“Any one of these signals in and of themselves is arguably random, but when you start stacking them all on top of each other, we continue to expect stocks to do very well and we continue to hold overweight stocks,” he said.

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