FX Evolution: The Last Time This Happened, Stocks Moved Over 20%…
The last hundred years of financial markets have shown seventeen events similar to the market’s recent drop and subsequent rally. The good news? Stocks are likely to trend higher, at least in the short term. That’s even after the S&P 500 soared nearly 6 percent in the span of a week.
That said, stocks are in a sensitive area, and could see some volatility in the coming weeks before a muti-month move higher.
The market’s recent move is based in part on the idea that the Federal Reserve is done hiking interest rates. While some see interest rate cuts coming in the next few months, that may be an overly optimistic view.
However, following the rapid increase from zero percent to over five percent, a breather on the interest rate front should allow stocks to move higher.
In the meantime, a rare signal has just occurred in stocks. Known as the Zweig Breadth Thrust (ZBT), it’s triggered just 17 times since 1945.
Each time, the markets are almost always higher. The average works out to 4.8 percent within 1 month, 7.5 percent within 3 months, and over 23 percent in a year.
With both a bullish fundamental and technical factor in play, investors may want to bet on a market rally in the coming months.