Research firm Ned Davis Research has released a report indicating that there is a bullish technical indicator in the US stock market, suggesting that the S&P 500 index will see a double-digit increase next year.
According to the financial app Zhitong Finance, research firm Ned Davis Research (NDR) has released a report indicating that there is a bullish technical indicator in the US stock market, suggesting that the S&P 500 index will see a double-digit increase next year.
Strategist Ed Clissold stated in a report on Wednesday that the stock market has entered the fourth phase of the bottoming process after the sell-off in early August.
Under a series of risks, the stock market fell more than 5% in early August, including weak jobs reports in July, unwinding of yen carry trades, and Warren Buffett significantly reducing his holdings of Apple stocks.
But since then, the S&P 500 index has risen nearly 10%, just 1% away from its all-time high.
Clissold explained, "The new breadth thrust signal confirms that the market is in the fourth step of the bottoming process and is crossing the recent pullback." He added that the four stages of bottoming for the stock market are oversold, rebound, backtest, and breadth thrust.
The strategist stated that on August 19th, a new breadth thrust signal flashed, indicating a shift from a few stocks participating in the rally to many stocks rising simultaneously.
Clissold said, "The basic principle is that if a few stocks are in trouble, other stocks may push up the stock index. The beginning of a major trend is often marked by breadth thrust signals, which is a high proportion of stocks rebounding together."
On Monday, when more than 90% of the stocks in the institution's Multi-Cap Equity Series jumped above the 10-day moving average, the breadth thrust "erupted".
Since 1980, this situation has occurred 42 times, and the stock market has risen 95% of the time one year later, with an average increase of 10%.
At the current level, such an increase would bring the S&P 500 index to slightly above 6100 points, which is almost in line with the price target predicted by a Wall Street bull for 2025.
Another breadth thrust occurred on August 8th, when the stock market had an "11:1 up day", which means the volume of rising stocks was 11 times that of falling stocks.
Clissold said he hopes to see at least five breadth thrust signals within three months to ensure that the stock market has more upward potential in the future.
The report states that since July 16th, three signals have appeared so far, but even if there are no additional signals 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. Lower interest rates are another factor favorable to the bulls."