A widely-followed stock-market indicator is flashing a strong buy signal as more companies join the ongoing rally.
A sharp rise in the McClellan Summation Index, a measure of market breadth, is now predicting further gains for the S&P 500 with near-perfect accuracy, according to Dean Christians, senior research analyst at SentimenTrader.
The McClellan Index tracks the participation of stocks in market movements. When the index rises, it indicates more stocks are contributing to the rally, signaling improved market breadth. Conversely, a falling index suggests a weakening market or broad sell-off.
Technical analysts use this index to assess the strength of stock movements beneath major indexes like the S&P 500. Historically, sudden jumps in the index have reliably forecast further market gains. When the index spikes from below 100 to over 1,000, stocks have climbed over the following year with a 96% success rate.
That accuracy jumps to 100% when the signal occurs with the S&P 500 within 2% of a significant high. On Monday, this signal was triggered.
For Christians, this suggests that the indicator’s forecasted gains are more than just part of the market’s general upward trend over time.
On Tuesday, the S&P 500 rose 14.36 points (0.3%) to close at 5,732.93, marking its 41st record close of 2024.
The Dow Jones Industrial Average added 83.57 points (0.2%) to finish at 42,208.22, another record, while the Nasdaq Composite gained 100.25 points (0.6%) to 18,074.52, though still 3% below its July peak.
