• The stock market is more prone to see record highs in early 2024 after an “extremely rare” signal just flashed.

• That’s in accordance with Carson Group chief market strategist Ryan Detrick, who highlighted one other sign that breadth is improving.

• “We proceed to expect stocks to do quite well and we remain chubby equities,” Detrick said.

An “extremely rare” signal just flashed throughout the stock market, suggesting to Carson Group chief market strategist Ryan Detrick that record highs are imminent.

Detrick highlighted in a Thursday note that greater than 60% of all components throughout the S&P 500 hit a contemporary 20-day high last week. This runs counter to the concept that mega-cap tech firms are driving nearly all of the gains throughout the stock market.

“Last week, we saw a very rare breadth thrust, which suggested many stocks were surging, which tends to be a signal of impending strength,” Detrick said. “That is amazingly rare and showed quite a few buying has taken place recently, not only in only a couple of large stocks.”

Since 1972, this rare signal has flashed 15 times, not counting last week’s signal. The S&P 500 was higher a 12 months later 100% of the time after the signal flashed, generating a median return of 18%.

If a similar gain occurs over the next 12 months, the S&P 500 would trade at just above 5,400, which exceeds even probably essentially the most bullish stock market forecasts.

Detrick highlighted that there have been other bullish signs throughout the stock market in recent weeks, including the S&P 500 surging 8.9% in November, representing its 18th best month ever.

When measuring the S&P 500’s 20 best months of performance, stocks were higher 80% of the time a 12 months later, with a median gain of 13%. And when counting the 30 months throughout the S&P 500’s history when gains were a minimum of 8%, stocks went on to rise 90% of the time in the subsequent 12 months.

“Over again, this signals the strength we just saw was likely the beginning to more strength, not the highest,” Detrick said.

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Finally, he noted that the S&P 500 hasn’t hit a record high since January 2, 2022, nearly two years ago. With stocks lower than 5% away from latest highs, Detrick said he expects a record high to be hit in early 2024, and if that happens, it might be yet one more bullish signal.

“Previous times stocks went a minimum of 1 full 12 months without latest highs after which hit one, the long term returns were very solid. The reality is, stocks were up 13 out of 14 times a 12 months later and up 14.9% on average after long streaks with no latest high after which finally making one,” Detrick explained.

When combined with the “extremely rare” technical breadth thrust signal that flashed last week, all signs are pointing for a continued bull market in 2024.

“Any one in every of these signals by themselves could possibly be argued to be random, but each time you begin stacking all of them on top of each other, we proceed to expect stocks to do quite well and we remain chubby equities,” he said.

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