Carson Group Chief Market Strategist Ryan Detrick has identified an “extremely rare” signal in the stock market, indicating that record highs are on the horizon in early 2024. Detrick points to the recent improvement in market breadth, emphasizing that this signal is not solely driven by mega-cap tech companies.
In a note on Thursday, Detrick highlighted that over 60% of all S&P 500 components hit a new 20-day high last week, signifying a notable breadth thrust, a signal of impending strength. This rare signal has flashed only 15 times since 1972, and each time, the S&P 500 was higher a year later with an average return of 18%.
If history repeats itself, and a similar gain occurs over the next year, the S&P 500 could trade at just above 5,400, surpassing even the most optimistic stock market forecasts.
Detrick pointed out other bullish signs in recent weeks, including the S&P 500’s impressive 8.9% surge in November, marking its 18th best month ever. Historical data reveals that in the 20 best months of S&P 500 performance, stocks were higher 80% of the time a year later, with an average gain of 13%. Additionally, in the 30 months when gains were at least 8%, stocks rose 90% of the time in the following year.
Highlighting that the S&P 500 hasn’t reached a record high since January 2, 2022, Detrick anticipates a new record high in early 2024, citing positive historical returns following periods without new highs. Combining this with the recent “extremely rare” technical breadth thrust signal, Detrick remains optimistic about the continuation of a bull market in 2024.
While individual signals might be considered random, the convergence of multiple positive indicators strengthens the outlook. Detrick concludes, “Any one of these signals by themselves could be argued to be random, but when you start stacking them all on top of each other, we continue to expect stocks to do quite well, and we remain overweight equities.”
