A Stock Market G.O.A.T. Appears: Perfect Historic Track Record

GOAT: That’s “Greatest of All Time”

We’ve messaged followers and investors the last 3 weeks, that the data said it wasn’t time to panic if you were a retire or already heavily invest, but rather time step up and to add to positions if you had some extra cash or if you were in your savings faze, earlier in your working careers, years from retirement.

The S&P500, after essentially peaking Dec 6^th, just under 6100, then meandering for 3 months into March, tanking on the frictionary tariff policies of the current administration, the index looks to had made a low on April 7^th.  That’s a -21.4% peak to trough intraday move lower, and almost -19% if you are using closing prices. The trillion dollar yet was April 7^th “A Low or The Low for the overall S&P500 index and USA stocks.

For 2 weeks our team messaged, that Ex a few periods like the GFC in 2007-08 and the popping of the speculative Dot.com bubble frenzy in 2000-01, which did proceed longer and deep recessions, history says enough damage had been done and one should be adding to desired positions.

Here’s the log chart of the SP500 since the end of the GFC in 2009 we shared for two weeks.  We went fom the top of the channel at around 6100+ in early December, to the bottom of the channel the last 5 months as initial hopes by investors for growth-oriented policies in DC were dashed instead for changing tariffs, DOGE cutbacks and other frictionary policies.

Historically, if we aren’t entering a prolonged recessionary period, this graphic would say buy stocks, add to positions. Yes, against the normal doomer calls, most recently due to the uninspiring historically unpredictive, dreaded Death Cross which we discussed last week.  You can catch our thoughts on the “death cross” in last week’s episode entitled “Market Correction or Bear Market, A Low or The Low”

And then on April 24^th one of the financial GOATs in the market appeared.  One of the Greatest of All-time indicators showed up.

And then something very rare happened between April 8^th and April 24^th, it happened when the S&P500 cash closed at 5485.  What was that? A Zweig Breadth thrust, something we’ve discussed 2 prior times in my OHFG career. We first discussed this rarity once in late December 2018 amongst the 4q18 -20% XMAS eve decline and then again into late October 2023 -11% S&P500 decline when many were declaring a recession forthcoming.

A quick recap of what the Zweig Breadth thrust indicator, developed by Marty Zweig is, and why it’s historically been relevant since 1939.  Yes, bears and market historians, prior to 1939, its success rate was not great. Prior to 1939, the signal was about 50/50 or a coin flip in success.  I’ll provide all the data per Paul Ciana at BOA securities/Merrill Lynch, inclusive pre- 1939 and exclusive at the end of the video, but given its 85 years of history and 16x winning streak, its worth heading in our work.

A Zweig Breadth Thrust signal is triggered when the 10-day Exponential Moving Average of NYSE Advancing stocks divided by Advancing plus Declining stocks goes from below 0.40 to above 0.615 within 10 trading days. Admittingly, everyone’s data is a little different and I’m goi ng to quote a few sources here whose data isn’t perfectly aligned but it does message the same. It’s bullish.

The idea behind the signal is a quick change in investor sentiment and positioning from negative to positive.  A sudden swing from negative breadth to really positive breadth is a sign that the bottom has formed, and that buying is overwhelming selling. That sellers have exhausted themselves, those on margin accounts have been blown out at the lows and all that is left are buyers and short covers.

Post Zweig thrust, since 1939, according to Merrill Lynch using Bloomberg data, the SPX was higher 100% of the time, 16 out of 16 in 130- and 190- trading days with an average gain over +17% and +19.5%. Since 1939 after 250 trading days or about 1 year, the S&P500 was up 15 of 16 times averaging over +21%.  No guarantee of course, but doing that math? The S&P 500 target a year forward? 5485×1.213= 6650, remarkably close to OHFG year end 2025 target of 6600-6660.  Here’s the data set from Paul Ciana at Merrill.

Likewise, a couple of weeks ago, after a 60 to 1 positive volume NYSE breadth day, and 15/1 advancing to decline day on April 8^th, our team foreshadowed the possible coming of a Zweig Breadth thrust posting Ryan Detrick, at the Carson Investment Group, historical data on the topic using Ned Davis and Factset data.  His data is a little different, I don’t know why. Using Ned Davis data, this indicator has been triggered 19 times since 1945,WWII, and the S&P 500 has never been lower 6 or 12 months later.

Here’s that data set once again.

SPX was higher 100% of the time, 19 for 19 times, averaging over +23% and median closer to +25%.  No guarantee of course, but doing this math? The S&P 500 target a year forward? 5485×1.25= 6855, remarkably close to the OHFG bull market peak, goldilocks in 2h25/1h26 of 7000+

Which begs the question, are all the sell side strategists who have radically cut their overly aggressive year end S&P 500 targets the last 2 months, going to have to raise them throughout the 2h25 right back toward where they started the year?

We’ve previously shared the October 1998 LTCM comparison, mid Dot.com overlay path, but recent events including many 1q25 technology earnings calls the last two weeks point to a mid AI build out, not a peak and collapse of AI.

I know you’re saying to yourself it’s different this time.  Maybe it is. But so far, it looks and feels a lot like it did back then.

Investors have rarely been this fearful and sentiment this negative, and historically when its been at these levels, you’ve been better off buying and walking away for 12-18 months than selling.  Per Lance Roberts at RIA here in Houston, net bullish AAII sentiment, as low as? Prior major lows.

Seems to me April 7^th, was the likely the low, not a low, in many things for the next 9-12 months. Another positive piece of trading data from the Carson group. During option expiration week of April 13^th, the S&P 500 gained more than +1.5% for three days in a row. How rare is this the last 75 years?  Super rare.  Only 10 occurrences over 75 years and the average gain over the next year?  Yeap over +20% with no misses.  No guarantees of course.

I get it.  When things are moving this fast it feels horrible.  However, historically, this is exactly when individual investors should be slowly adding to their long-term stock allocations not retreating.  Why? Because time is on your side.  Volailty has ramped because there are many traders being forced to sell at the lows.  Being “derisked” being blown out for taking excessive risk at the wrong time.

Historical volatility spikes like we just saw are buy and mold points, not pull the rip cord and eject points.  No there is not a lot of good economic news out there on the screens right now.  These are definitely the times that are stressful for investors and those cared with managing others savings and financial plans. But I ask you this question who are you listening too?  Are you listening to too many people and their opinions about your money?  Here’s my list of who one should be listening to about their money and investments, some are dependent on whether you’re a investor or trader but it’s a pretty short list:

Worth listening to:

1. Your financial planner, very different than financial analysts and most advisors. They should know your personal financial situation not just your investment holdings.
2. Warren Buffet – The Goat for buy and hold investors
3. David Tepper – Appaloosa Hedge Fund, the Goat for Hedge Fund investors, rarely speaks so when he does its meaningful
4. Steve Cohen – Point72/SAC Hedge Fund, the Goat for Hedge Fund Traders
5. The Markets themselves, rare indicators produced from the likes of Marty Zweig

 

Not worth listening to:

1. 5% of Investment newsletter writers
2. 5% of financial news commentary
3. 5% of retired hedge fund billionaires
4. 9% of economists
5. 9% of famous rich billionaires
6. 100% of One hit wonders which there are too many to list

Can the markets go lower in 2025, of course there are no guarantees. But the data is saying the worst of the 1h25 financial storm has likely passed, like 4q2018 and 4q1998 and like so many other corrections over the last 15 years.

Regardless of the path for the economy and financial markets in the next few months, the investment team at OHFG will be here manning the ship and adjusting our models and long/short, hedged equity fund where we can.

Until next week, have a blessed weekend and know that the OHFG team is doing what we can to plan for you and your family’s future regardless of what stage you are at in your career or retirement.

Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free consultation: https://click2retire.com/Connect