The S&P 500's rally off the lows on April 9 has been impressive and broad-based. Most stocks have participated in the move higher, including beaten-up technology stocks that bore the brunt of the post-tariffs early-month sell-off.
After President Trump unveiled worse-than-hoped reciprocal tariffs on April 2, so-called Liberation Day, the S&P tumbled 12% through April 8. The sharp and fast selling contributed to President Trump pausing most reciprocal taxes on April 9 for 90 days to negotiate deals with impacted countries.
The potential for Trump to strike deals, resulting in lower tariffs, sent the S&P 500 surging 10%, despite very real risks remaining for the economy.
The S&P 500's rally has been so widespread that one particularly rare signal, the Zweig Breadth Thrust, developed by legendary investor Martin Zweig, flashed on Thursday, April 24.
A rare Zweig Breadth Thrust may signal higher stock prices in one year.Image source: Nagle/Bloomberg via Getty Images
A Zweig Breadth Thrust, explained
Martin Zweig was a successful investor who published a major stock market newsletter in the 1970s. He also contributed to Barron's and was a frequent guest on Louis Rukeyser's Wall Street Week, a must-watch TV show for investors in the 1980s.
Zweig is perhaps best known for predicting Black Monday in 1987, when stocks lost over 20% in one day, coining the phrase "don't fight the Fed," and his top-selling investment book, "Winning on Wall Street."
He developed the Zweig Breadth Thrust after realizing that a shift from widespread selling to buying in 10 days or less had led to significant gains over the following year.
The Zweig Breadth Thrust triggered on April 24 is just the 20th since 1945, according to Carson Investment Research. The last time we saw one was near the S&P 500's low in November 2023.
In the past, the benchmark S&P 500 has produced gains 100% of the time one year later, with an average and median return of over 23%.
Zweig Breadth Thrusts are uncommon because they require a period of extremely broad selling immediately followed by extremely broad buying.
The measure is calculated by dividing a moving average of the number of NYSE stocks advancing by the total number of advancing plus declining stocks.
Initially, a ratio of 0.659 was considered a buy signal, while 0.366 was a sell signal. However, the indicator's buy signal has since been modified to be when the 10-day exponential moving average of stocks rises above 61.5% after being below 40% within the past two weeks.
What happens after a Zweig Breadth Thrust?
The S&P 500 has historically delivered robust returns after a Zweig Breadth Thrust.
Not only was the S&P 500 up one year later by an average of nearly 24% following every previous occurrence, but it has also delivered impressive short- and intermediate-term results.
The average historical return over the following one, three, and six months is 5%, 8%, and 15%, with a 95%, 79%, and 100% success rate.
The high win rates over one, six, and 12 months are impressive. However, investors should recognize that stocks don't go up in a straight line, which is why the three-month win rate is solid but lower.
A Rare And Very Bullish Breadth Thrust Just TriggeredSource: Carson Investment Research, Ned Davis Reseach, FactSet 04/24/2025
Importantly, while many look to Zweig Breadth Thrusts as a great long-term buy signal, stocks have retested and even made new lows in the past following them, including in 2023, when we got two signals, one in spring and the other in the fall.
"So let’s take a look at the last two Breadth Thrusts," wrote Helene Meisler on TheStreet Pro. "My first observation is I’d bet most think this means up, up, and away, yet if that’s the case, why did we have not one, but two in the year 2023? Yes, that’s right. We got one in the spring, and the market corrected eleven percent over several months that summer/fall."
Therefore, while this signal suggests stocks will soar over the coming year, it doesn't necessarily mean the stock market has reached its absolute lows.
Could this time be different?
The most dangerous words in investing are "this time is different." While each situation resulting in a stock market sell-off is unique, investors' emotional reactions to stock market corrections and crashes are similar.
To paraphrase Twain, history may not repeat, but it does rhyme.
Sure, plenty of things are happening right now that should make investors wring their hands. Inflation has proven sticky, and the jobs market is weakening, given that unemployment increased to 4.2% from 3.4% in 2023. Economic data suggests this year's gross domestic product (GDP) is decelerating. That's not great.
The uncertain tariffs picture certainly doesn't help either, given that tariffs are inflationary import taxes that can kibosh spending.
Still, this is far from the only troublesome period that a Zweig Breadth Thrust has fired. For instance, there were many reasons to say, "This time is different," in 2009 during the Great Financial Crisis.
Obviously, we can't rule anything out, and in the short term, a Zweig Breadth Thrust doesn't necessarily mean we're out of the woods. Stocks often require back-filling of gains, meaning a retest or new low isn't out of the question.
Nevertheless, the returns associated with a Zweig Breadth Thrust are undeniably encouraging for long-term investors with horizons longer than six months or one year.
