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Editor’s note: “The 100% Accurate Bull Market Indicator That Flashed Last Year” was previously published in November 2022. It has since been updated to include the most relevant information available.
Recently, my team and I have become the most bullish we’ve ever been since the COVID-19 pandemic emerged in March 2020.
Why? Because dozens of the fundamental, technical, and sentimental indicators that we closely track have hit extremes recently. And they’re extremes that they only tend to hit when bear markets bottom and bull markets are born.
And we discovered the most compelling of these indicators.
It’s a technical indicator that flashed an “extreme fear” signal back in October. This indicator has flashed this exact same signal more than 100 times over the past 32 years. Every single time, the market was higher a year later, with an average return of nearly 30%.
Of course, after we discovered this technical indicator, we became more bullish than ever.
The bear market is almost certainly ending, and a new bear market is starting to emerge. And the weight of evidence today strongly suggests that investors who invest now will make a lot of money over the next 12 months.
Here’s a deeper look.
The Weakest Market Ever?
The technical indicator we are referring to is the McClellan Oscillator.
In short, it is a unique statistical measurement of the number of advancers in the market relative to the number of decliners. It’s a market breadth indicator, which can be applied to both stocks and cryptos.
Specifically, the indicator measures the difference between the 19- and 39-day exponential moving averages of net advancing stocks. The higher the difference, the wider the market breadth. The lower the difference, the narrower the market breadth.
The McClellan Oscillator is broadly considered the best way to measure market breadth.
In any event, the 50-day moving average of the McClellan Oscillator dropped below -15 last year. That’s an unusually weak McClellan Oscillator reading. It’s about as weak as the reading has ever been. It speaks to “peak fear” and “peak weakness” in the market.
For context, this oscillator has dropped below -15 only 109 times before on record (going back to 1990), meaning the oscillator has spent just 1.4% of trading days at that low level.
Now, here’s the bullish part: The markets tend to rally big after the McClellan Oscillator gets this negative.
And not just sometimes – but ALWAYS.
A Perfect Track Record
Guess when the last time was that the McClellan Oscillator was this negative? Yep – March 2020, at the depths of the COVID-19 pandemic.
How about before that? June 2016 – right after the Brexit vote.
And before that? June 2012, when everyone was worried that the economy would slip back into a deep recession.
The McClellan Oscillator was also this negative in June 2010 (amid a foreign debt crisis), November 2008 (at the depths of the great financial crisis), August 2002 (the bottom of the dot-com crash), June 1999, and August 1990.
What do all these months have in common? They were all very, very close to an absolute bottom after a stock market rout.
The other thing they have in common? Markets soared in the months that followed.
Here’s the exact data. Since 1990, on the 109 occurrences when the McClellan Oscillator dropped below -15:
- 74% of the time, markets were higher a month later, with an average return of 4%.
- 82% of the time, markets were higher three months later, with an average return of 8%.
- 94% of the time, markets were higher six months later, with an average return of 16%.
- 100% of the time, markets were higher 12 months later, with an average return of 29%!
In other words, we discovered a technical indicator with a 100% track record (on over 100 data points) of calling a market bottom and new bull market – and predicting massive returns over the next 12 months.
That’s a big deal.
And it’s not just stocks – cryptos benefit from a low McClellan Oscillator reading, too…
New Crypto Bull Market?
It increasingly appears the crypto market is working through a bottoming process right now. There’s a ton of evidence suggesting as much.
If so, that’s incredibly bullish because the greatest returns are made when a bear market becomes a bull market. And we believe now is the time to position ourselves for “Boom Cycle 2023”!
Cryptos are a hedge against money-printing and a major risk-on asset. Therefore, cryptos tend to work exceptionally well when monetary policy is loosening, and they tend to crash when monetary policy is tightening. Monetary policy was tightening throughout all of 2022, hence the crash in cryptos. But the macroeconomic tides are starting to turn – inflation is falling, the economy is cooling, financial stress is building, etc. – in a way that’s supportive of a Fed policy pivot. Tightening will turn into loosening at some point in 2023. And as inflation continues to cool and the Fed pivots, cryptos will soar and enter a new boom cycle.
Indeed, year-to-date, Bitcoin has already climbed a whopping 37%. And it’s still only January.
Given the continued rapid disinflationary trend we’re seeing in the bulk of economic data, this Fed policy pivot is underway. And it’s just in time for the third convergence on our “Bitcoin Triangles” chart, which graphs the price action on Bitcoin (BTC-USD) as a series of descending triangles. Notably, every single major move in Bitcoin throughout 2022 was sparked by a convergence of descending triangles.
Source: Bloomberg
The Final Word on the Incoming Bull Market
It increasingly appears the 2022 bear market is finally dying, and a new bull market is rising from the ashes. There’s simply a ton of evidence suggesting as much.
If so, that’s incredibly bullish because the greatest returns in stock market history are made when bear markets turn into bull markets.
On average, the stock market rises about 10% per year. But after the 2020 bear market, stocks soared 27% in 2021 – about 3X their average.
After the 2018 brief bear market, they popped 29%.
After the 2008 bear market, they rose 24%.
Following the 2002 bear market, they soared 26%.
And after the 1990 bear market, they popped 26%.
You get the point. In the years after bear markets turn into bull markets, stocks tend to soar by more than 20%, or more than double their average annual return.
They perform twice as good.
But cryptos will do even better.
After its first crash in 2011, Bitcoin rose more than 55,000% over the next two years. After its second crash in 2014, Bitcoin rose more than 9,000% over the next three years. Then after its 2018 crash, Bitcoin rose more than 1,500% over the next two years.
And following its 2022 crash, Bitcoin will once again rise more than 1,000% over the next two to three years.
This isn’t rocket science, folks. It’s just history repeating itself. And investors who recognize this are – right now – putting themselves in position to make fortunes in the crypto market over the next two to three years.
Follow the insiders to major wealth.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
The post The 100% Accurate Bull Market Indicator That Flashed Last Year appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
