Bullish signals flashing! Research firm: US stocks may see double-digit gains next year

A bullish technical indicator has just emerged in the US stock market, indicating that the S&P 500 Index (SPX) will see a double-digit increase next year. Ed Clissold, a strategist at Ned Davis Research, wrote on Wednesday that after the sell-off in early August, the stock market has entered the fourth stage of the bottoming process. In early August, US stocks fell by more than 5% due to a series of risk events such as the soft July employment report, unwinding of yen carry trades, and Buffett's reduction of Apple shares. However, since then, the S&P 500 Index has rebounded by nearly 10%, only 1% away from its historical high. Clissold explained, "The new breadth thrust signal confirms that the market is in the fourth stage of the bottoming process and has passed the recent pullback. The four stages of the stock market bottoming process are oversold, rebound, retest, and breadth thrust." It is rare for the stock market to swing from oversold to overbought in a very short period of time. Once this situation occurs rapidly, it forms a rare breadth thrust signal. On August 19, the breadth thrust signal flashed, indicating a rapid transition from a few stocks participating in the rise to many stocks rising simultaneously. Clissold said, "The reason this is a bullish signal is that if a few stocks are in trouble, other stocks will drive popular indices higher. Major trends often begin with a breadth thrust signal, which is a high proportion of stocks rebounding together." On Monday, when over 90% of stocks in the NDR internal Multi-Cap Equity Series jumped above the 10-day moving average, the breadth thrust "erupted". Such a situation has occurred 42 times since 1980, with the stock market rising 95% of the time in the following year, with an average increase of 10%. If the S&P 500 Index rises from its current level, it will be slightly above 6100 points, almost in line with a Wall Street bull's target for 2025. On August 8, the stock market experienced an "11:1 up day", where the trading volume of rising stocks was 11 times that of falling stocks. Clissold stated that he hopes to see at least five breadth thrust signals flash within three months to confirm that there is more upside potential in the stock market. The report stated that since July 16, there have been three signals flashing so far, but even if two signals cannot be seen by mid-October, the stock market may still be in a favorable position due to expected interest rate cuts. Clissold said, "We may not get five breadth thrust signals, but other trend indicators are turning bullish. Falling interest rates are another factor favorable to the bulls."