Zweig Breadth Thrust: From caution to YOLO

I would like to address the feedback from my recent publication, Nine reasons why this rally has legs. Some readers questioned my change in tone in the interpretation of the Zweig Breadth Thrust buy signal.
As a reminder, the ZBT is a price momentum signal. It is triggered when breadth indicators rise from oversold to overbought within 10 trading days. Breadth thrust price momentum signals usually resolve in a surge. The market triggered a ZBT buy signal on March 31, 2023 and my reaction was cautious (see Why I am fading the latest breadth thrust). This time, the tone is far more bullish and I am inclined to adopt a YOLO (You Only Live Once) to portfolio positioning.

I wrote in early April that I was cautious, but not outright bearish. I was mostly correct. Instead of a price surge, the S&P 500 traded sideways for two months after the buy signal, rallied and topped out in late July, and pulled back to the approximate level of the buy signal in late October.

Here’s what’s different about the latest signal compared to March.

 

The full post can be found here.