The stock market is expected to reach record highs in early 2024 after an “extremely rare” signal just occurred.
That’s according to Ryan Detrick, chief market strategist at the Carson Group, who pointed to another sign that scale is improving.
“We continue to expect stocks to perform quite well and we remain overweight in stocks,” Detrick said.
An “extremely rare” signal just popped up in the stock market, suggesting to Carson Group Chief Market Strategist Ryan Detrick that record highs are imminent.
Detrick pointed out in a Thursday note that more than 60% of all components of the S&P500 hit a new 20-day high last week. This runs counter to the idea that large-cap technology companies are driving the bulk of the stock market’s gains.
“Last week we saw a very rare surge of magnitude, which suggested that many stocks were moving higher, which tends to be a sign of impending strength,” Detrick said. “This is extremely rare and shows that a lot of buying has happened 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 one year later 100% of the time after the signal, generating an average return of 18%.
If a similar gain occurs over the next year, the S&P 500 would trade just above 5,400, which exceeds even the most optimistic stock market forecasts.
Detrick pointed out that there have been other bullish signs in the stock market in recent weeks, including the S&P 500 up 8.9% in November, marking its 18th best month ever.
When measuring the S&P 500’s 20 best months of performance, stocks were up 80% of the time a year later, with an average gain of 13%. And if you count the 30 months in the history of the S&P 500 in which gains were at least 8%, stocks continued to rise 90% of the time the following year.
“Once again, this indicates that the force we just saw was likely the beginning of a larger force, not the end,” Detrick said.
Finally, he pointed out that the S&P 500 has not reached an all-time high since January 2, 2022, almost two years ago. With stocks within 5% of new highs, Detrick said he expects an all-time high to be reached in early 2024, and if that happens it would be an additional bullish signal.
“Previously, stocks went at least a full year without new highs and then hitting one, future returns were very strong. In fact, stocks were up 13 times out of 14 a year later and up 14.9 % on average after long streaks without a new record and finally reaching one,” Detrick explained.
When combined with the “extremely rare” technical push signal that broke out last week, all signs point to a continued bull market in 2024.
“Any one of these signals on their own could be considered random, but when you start stacking them on top of each other, we continue to expect stocks to perform quite well and we remain overweight on stocks “, did he declare.
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