No pain, no gain⦠[TradeSmith Daily]( Rare âBear Killerâ Signal Shows 100% Chance of Stock Surge
The bruises of the past couple months havenât been fun. The 10% peak-to-trough slide in the S&P 500 outright hurt. BUT⦠thatâs part of investing. Itâs what we sign up for. You have to take the pain to enjoy the gain. The good news is, mega gains are shaping up for investors right now. You see, every now and then, selling gets so intense that it triggers the ultimate buy signal⦠one with an enviable track record. Thatâs right. History shows when this rare âbear-killerâ signal flashes, going back more than 30 years, stocks roared in epic fashion 100% of the time. Weâll get to that evidence-backed study in just a moment. But first letâs take a stroll through the current market landscape… RECOMMENDED LINK [Could This Tiny Microcap Be the Biggest A.I. Opportunity of the Decade?](
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[Go HERE for details]( A Perfect Oversold Storm
Recently I wrote how the [number of stocks above their 50-day moving average]( reached an extreme low. In it, I showed how 19% of stocks met the criteria. Today that number has vaulted to a much healthier 44%.
Barchart
But, this isnât the only crucial sign that breadth is improving. Itâs just as important to understand how severe the recent downturn was. Above, notice the green circles indicating that we hit a breadth level of near-zero. Last month the reading sank to 6%, which we last saw briefly during the 2022 lows. Extreme selling, just like this, is what marks a bottom. And even this isnât the only marker that reached severe depths. My favorite indicator — the Big Money Index (BMI), which I created with [Quantum Edge Pro]( editor Jason Bodner — also dipped into extreme oversold territory. As a reminder, the BMI tracks institutional buying and selling in stocks. When sellers are in control, the BMI falls. When buyers take over, it jumps higher. During Octoberâs thrashing, the BMI (yellow line in the chart below) sank to levels last seen during the Pandemic Crash of March 2020. Thatâs right; it broke below all of 2022âs oversold readings (the dashed green line is oversold):
Notice how the green âoversoldâ zone tends to offer a compelling time to buy stocks. Every time the BMI has hit that zone, the market surges soon after. Octoberâs BMI reading fell below 19%. Whatâs incredible about that is itâs only happened a handful of times since 2016. After each instance, the market zoomed higher in all time frames.
- A month after a sub-19 BMI, the S&P 500 ramps up an average of 12.1%.
- 6 months later, equities climb an average of 28%.
- 12 months later, youâre staring at 47.6% gains on average. This is what a âbear killerâ signal looks like: Green across the board with a 100% hit rate. And I know what youâre thinking. âLucas, this is only back to 2016. What about going back further?â Iâm glad you asked! RECOMMENDED LINK [My #1 way to make money right now](
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If we take this back to 1990, a BMI reading below 19 has occurred 129 times. Every single time, a year later the market was higher, posting an average rally of 24.7% 12 months later.
At this point you should feel sad for the bears… Because whatâs coming will send them into a long hibernation! Seriously, congrats if youâve been nibbling away at stocks the past few weeks as Iâve been preaching. I know it wasnât fun at the time. But history says youâre making the right decision. Extremely oversold conditions are a blessing in disguise — but only for the bold. You want to be long stocks right now. The historical data is screaming at us to be bullish. And no amount of fear-driven mainstream media headlines should cause you to hesitate. Regards, Lucas Downey
Contributing Editor, TradeSmith Daily P.S. We here at TradeSmith Daily hope you consider this one of the most valuable emails you read each day. But thereâs another weekly email going out from our headquarters [Iâd like to share with you](. It contains a slew of opportunities to draw income from the market using a little-known, low-risk technique. Readers are reporting making extraordinary sums of money from this Monday 12 p.m. email. ([See what they had to say here]( And as soon as I saw what they were saying, I knew you had to see it too. [Get the full details about how to access this weekly email, packed with actionable profit opportunities, right here.]( Get Instant Access
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