Market Thrusts Signal the End of Downturns
60sProvides a clear, actionable indicator for market turnaround, highly valuable to investors.
▶ Play ClipAI Summary
The video explains how to identify the end of a market downturn using 'market thrusts' — strong bursts of buying activity. It covers specific indicators like the percentage of stocks hitting 20-day highs and the Zweig Breadth Thrust, and emphasizes the importance of combining multiple signals for confirmation.
Chapters
[00:29]
Definition of Market Thrust
A market thrust is a strong advance in prices, often seen when many stocks hit 20-day highs simultaneously.
[00:43]
20-Day High Signal
When at least half of the S&P 500 hits a 20-day high, it signals strong buying interest and often follows major declines.
[02:28]
Zweig Breadth Thrust
The Zweig Breadth Thrust occurs when the 10-day average of advancing to declining stocks moves from below 0.4 to above 0.6 within two weeks.
[03:21]
10-to-1 Up Day Signal
Ned Davis Research looks for days with at least 10 advancing stocks for every 1 declining stock, occurring twice within two weeks.
[04:36]
Combining Signals for Confidence
Combining multiple thrust signals (3-4 out of 11-12 tracked) increases confidence that the market has bottomed.
Mentioned in this Video
Tutorial Checklist
1
00:43
Monitor the percentage of S&P 500 stocks hitting 20-day highs. Look for at least 50% simultaneously.
2
02:28
Track the Zweig Breadth Thrust: 10-day average of advancing to declining stocks moving from below 0.4 to above 0.6 within two weeks.
3
03:21
Watch for 10-to-1 up days (10 advancers for every 1 decliner) occurring twice within a two-week period.
💡 Key Takeaways
🔧
Defining Market Thrusts
Provides a clear, actionable definition of a key market signal.
00:29
📊
Rarity of Zweig Thrust
Highlights how rare and significant this signal is, with only a few occurrences since 2008.
02:50
⚖️
Confirmation Through Multiple Signals
Emphasizes the importance of combining multiple indicators for higher confidence.
04:36Full Transcript
[00:00] And so now turning to the question I get asked a lot when I do different meeting interviews
[00:17] or from my own clients is what are the signs you look for that we get this all clear that the downturn we're in is over and that we can return to being bullish again on the market.
[00:29] what I tell them is that we look for market thrusts. What a thrust is, is this big explosion of buying activity. This really strong advance in prices of individual equities. We see a lot
[00:43] of stocks hit, for example, 20-day highs. Here's looking at the percent of the S&P 500 that's at a 20-day high. And we have at least half of the market hit a 20-day high all at the same time. That's showing us that there's a lot of buying interest in the market. And you see here's a
[00:58] green line plotted each time that occurs. And it typically happens after we've had a major decline. Very rarely do we see half the market hit a new, a new essentially one month high in the same,
[01:11] at the same time when the bears or when sellers are in, in a lot of control of the exchange or of the price action Looking again well turning back to that six month data See we using we using the same data just from different viewpoints Again looking at six highs and six lows
[01:28] Here we're again looking at when we have 20%, less than 20% of stocks making six-month net highs. And when we get back to 80%, tells us that we have a really strong stock market.
[01:42] And you can see this happened at the bottom, after the dot-com period, at the bottom in 2009. 2016, at the start of 2019, and then in about April of 2020. These types of market improvements
[01:56] happen after bear markets occur. A lot of people try to time and they want to get the absolute low, and you can try to catch the proverbial falling knife. Instead, if we look for market improvement,
[02:09] we don't necessarily care that there's 20% of the market that's making new lows. We want to see when the market's making improvements. When we have a lot of stocks that are making six-month highs, that tells us when the market potentially has put in a final low and buyers have resumed control.
[02:28] There's a lot of very popular, very commonly discussed breath thrusts. Probably the most well one was invented by Martin Zweig and it called the Zweig breath thrust It happens very rarely in the stock market What Zwieg was looking for was for the 10 average of advanced declines to go from 0 to over 0 within a two time period
[02:50] You can see going back to 2008, this hasn't happened very often. The last time this happened was actually just a few days after the market low in 2018. It actually hasn't happened since then. To have that go from under 0.4 to over 0.6 within that short period of time is pretty difficult to
[03:07] do. But what it does happen has been a pretty good signal that the market has reversed higher and that buyers are back in control of the price action. Another popular one was developed by Ned
[03:21] Davis Research. And what they were looking for was 10 to 1 up days, meaning if you take the number of stocks that are advancing divided by the number of stocks declining, they want at least 10 advancers for every one decliner. And they want to see that happen two times without the reverse
[03:36] happening, meaning without having 10 decliners to everyone at dance. And when you had two days that are 10 to one within a two-week time period, again, showed the market was pretty strong.
[03:48] This has happened just three times since 2008, happened right after the 2018 decline after COVID crashed And this one actually has happened within our current market You can see the green line most recently on the far right side happened in july where we had a really strong um about 15 to 1 and then we had a really strong day of actually over 40 to 1 advancers or decliners
[04:11] as the market had put in its low advanced for several weeks and these really really strong um strong updates telling us that buyers potentially were back in control and so something that i focus
[04:23] on is looking at a lot of different gauges of breath thrust i tracked about 11 or 12 different ways of measuring these these different thrusts and i created a composite and so from my research
[04:36] i want to see not just one or two of these thrusts occur i want to see three ideally four of these thrusts occur when we start seeing a lot of these these really strong bullish days in the breath
[04:48] data really gives us that confidence that the market has potentially put in a low. Again, nothing works perfectly, and breath thrusts aren't the end-all, be-all crystal ball to the market,
[05:01] but these are great signs that tell us when the market, there may have been a shift in the market from sellers to buyers. And you can see the green lines here is every time we've had, I believe it's four breath thrusts from the collection of 11 or 12 that I track. And typically the market is to
[05:18] has had really strong performance after those periods of time.
