An “extremely rare” stock market signal with a 100% accuracy rate is flashing, pointing to record highs in 2024

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• The stock market is set to hit record highs in early 2024 after an “extremely rare” signal just emerged.

• That's another sign that breadth is improving, according to Carson Group chief market strategist Ryan Detrick.

• “We continue to expect stocks to perform reasonably well and we remain overweight equities,” Detrick said.

The stock market just flashed an “extremely rare” signal that, to Carson Group chief market strategist Ryan Detrick, suggests record highs are imminent.

Detrick highlighted in a note Thursday that more than 60% of all components in the S&P 500 hit a new 20-day high last week. This contradicts the idea that large technology companies account for the majority of profits in the stock market.

“Last week we saw a very rare burst of breadth that suggested many stocks were on the rise, which tends to be a signal of strength to come,” Detrick said. “This is extremely rare and shows that there has been a lot of buying recently, 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 100% higher a year later after the signal flashed, returning an average of 18%.

If a similar rise occurs next year, the S&P 500 would trade at just over 5,400, exceeding even the most optimistic stock market forecasts.

Carson Group

Detrick emphasized that there have been other positive signs in the stock market in recent weeks, including an 8.9% rise in the S&P 500 in November, marking its 18th best month ever.

When measuring the S&P 500's top 20 performing months, stocks were higher a year later 80% of the time, with an average gain of 13%. And if you count the 30 months in the S&P 500's history in which gains were at least 8%, stocks rose 90% the following year.

“This shows once again that the strength we just saw was likely the beginning of more strength, not the end,” Detrick said.

The story goes on

Finally, he noted that the S&P 500 has not reached a record high since January 2, 2022, almost two years ago. With shares less than 5% away from new highs, Detrick expects a record high to be reached in early 2024, and if that happens, it would be another bullish signal.

“It used to be that stocks would go at least a full year without making new highs and then hit one and future returns were very solid. In fact, a year later, stocks rose 13 out of 14 times and by an average of 14.9% after long strikes without reaching a new high and then finally hitting one,” Detrick explained.

Combined with the “extremely rare” technical breadth push signal that flashed last week, all signs point to a sustained bull market in 2024.

“Each of these signals on their own could be described as random, but when you stack them all on top of each other, we continue to think stocks will do quite well and we remain overweight stocks,” he said.

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