A rare “what’s the credit card limit” buy signal

Cam Hui from the Pennock Idea Hub has a knack for calling market turning points. In his latest pieces he highlights one indicator, that he describes as providing a “what’s the limit on my credit card” buy signal for investors. The indicator uses the Zweig Breadth Thrust (ZBT). For those of you not familiar with this measure, a “Breadth Thrust” occurs when, during a 10-day period, the Breadth Thrust indicator rises from below 40% to above 61.5%. A “Thrust” indicates that the stock market has rapidly changed from an oversold condition to one of strength, but has not yet become overbought. According to Dr. Zweig, the man who came up with this, there have only been 14 Breadth Thrusts since 1945. The average gain following these 14 Thrusts was 24.6% in an average timeframe of 11 months. Dr. Zweig also points out that most bull markets begin with a Breadth Thrust. Hui cuts to the chase. ”Monday’s strong NYSE breadth has pushed the ZBT Indicator into buy signal territory. Call this a “what’s the limit on my credit card” buy signal for investors, though not necessarily traders. We believe the ZBT buy signal is a rare display of bullish positive momentum. While investors have to be prepared for some short-term setbacks, the odds favour higher stock prices in a 12-month timeframe.”