According to a rare technical indicator, the S&P 500 is going to signal that the stock market downturn that began last year is finally done.

After a 20% market fall, the S&P 500 has recorded two consecutive monthly finishes above its 10-month moving average.

S&P 500 Indicator

According to Urban Carmel, an investing strategy analyst at The Fat Pitch, the signal would be activated if the S&P 500 closes February above 3,947.

The S&P 500 was trading at 3,996 on Tuesday, with less than two hours left in the month of February.

For stock market bulls, the market signal has proven to be extremely dependable.

It has been triggered 14 times since 1960, and each time proved that the bear market low has already occurred.

That indicates that if the present trigger is successful, the S&P 500’s mid-October low of just under 3,500 will truly be the bear market low.

Every time since 1960, the bear market low (i.e. after a 20% fall) has been in when the S&P 500 closes above the 10-month moving average two consecutive months,Carmel stated in a tweet on Monday.

The market signal was last activated in June 2020, which proved to be an extraordinarily beneficial opportunity to buy equities.

The signal was also activated in February 2012, July 2009, and May 2003.

February Correction Not a Concern

Carmel is unconcerned by the fact that stocks are set to fall in February.

The second month was red in two of the fourteen cases (like now). In both situations, [the] S&P 500 moved on to a new [all-time high] (new ATH in 1972) and 1988 (new ATH in 1989), “Carmel elaborated.

Nevertheless, if you zoom out more to include more data, the market signal isn’t completely flawless.

From 1940 through 1960, the signal was triggered three more times, with one of those attempts failing and the S&P 500 retesting its 1948 low.

Yet, Carmel’s market signal is merely another positive technical indicator indicating that the worst may be over for investors.

Earlier this month, Anthony Scaramucci highlighted an under-the-radar technical indication indicating the start of a new bull market.

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