- The stock market is likely to hit all-time highs in early 2024 after an "extremely rare" signal just appeared.
- This is according to Carson Group chief market strategist Ryan Detrick, who highlighted another sign that breadth is improving.
- "We continue to expect stocks to perform quite well and remain overweight equities," Detrick said.
An "extremely rare" signal just appeared in the stock market, suggesting to Carson Group chief market strategist Ryan Detrick that all-time highs are imminent.
Detrick highlighted in a note on Thursday that more than 60% of all components of the S&P 500 hit a new 20-day high last week. This flies in the face of the idea that mega-cap tech companies are driving most of the gains in the stock market.
"Last week we saw some very unusual breadth momentum, which suggested that many stocks were rising, which tends to be a sign of impending strength," Detrick said. "This is extremely rare and shows that there has been a lot of buying recently, not just in a few big stocks."
Since 1972, this rare signal has flashed 15 times, not counting last week's signal. The S&P 500 rose one year later 100% of the time after the signal appeared, 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 bullish stock market forecasts.
Carson Group
Detrick noted that there have been other bullish signs in the stock market in recent weeks, including the S&P 500 which rose 8.9% in November, marking its 18th best month ever.
When measuring the S&P 500's 20 best months of performance, stocks are up 80% of the time a year later, with an average gain of 13%. And counting the 30 months in the history of the S&P 500 in which gains were at least 8%, the stock rose 90% of the time over the next year.
"Again, this indicates that the strength we just saw was probably the beginning of greater strength, not the end," Detrick said.
Finally, he noted 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 another bullish sign.
"On previous occasions, stocks went at least a full year without new highs and then hit one, future returns were very strong. In fact, stocks were up 13 out of 14 times a year later and were up 14.9% on average after long streaks without a new high and finally reaching it," Detrick explained.
When combined with the "extremely rare" technical breadth signal that appeared last week, all signs point to a continued bull market in 2024.
"You could argue that any of these signals on their own are random, but when you start stacking them on top of each other, we still expect stocks to do pretty well and we remain overweight stocks," he said.
