A few decades ago, hedge fund manager/strategist Marty Zweig came out with a game-changing book called "Winning on Wall Street." In this masterpiece we find some great nuggets to use in evaluating market performance. Most of the statistics are old and dated, but their meaningfulness is evergreen and will never die. Zweig followed patterns endlessly and carried a PhD in finance on his way to a remarkable career. Many old-timers remember his many appearances on "Wall Street Week" with Lou Rukeyser.
Zweig was on the show on Oct. 16, 1987, the Friday before the massive market crash of Monday, Oct. 19. The Dow Industrials fell 26% that day. Zweig warned on the program something bad was about to happen, he felt it deep inside. He looked ill, worried and a bit frightened during the program. His intuition was indeed correct, and history would judge him as one of the great market evaluators of our time (he passed away at 70 in 2013).
Zweig's great legacy is the work he shared with everyone. The tools he used were legendary and quite often the most accurate of all. Others such as Dick Arms and the McClellans have come up with valuable tools, too, but Zweig's are pinpoint accurate and rarely if ever fail.
The breadth thrust indicator is an amazing tool that keeps on giving to those who pay attention. The signal is a rare one, but flashed twice within a couple weeks recently (Dec. 26 and Jan. 4). This signal turned market conditions bullish from a steep bearish trend. The signal is not to be taken lightly, and could move markets to much higher gains down the road.
Let's look at Jan 4. What was the catalyst? There was a strong jobs report and a sit-down session with Fed Chairman Jerome Powell and prior Fed chiefs Ben Bernanke and Janet Yellen. They did a question-and-answer session where Powell indicated the Fed governors may be "patient" in their rate hikes to come. Really? After saying the opposite just a few weeks back, what changed so quickly? We don't know nor do we care, it just happened. All the sudden, the Federal Open Market Committee was now uber-dovish.
"Don't fight the Fed" is what Marty Zweig reminded us at all times. This was a moment to listen carefully and act appropriately. We don't believe the bear market is over, but you'll get plowed over if you fight the Fed.