Never Short a Double Sharp Market By Lucas Downey, Contributing Editor, TradeSmith Daily 2024 didn’t disappoint investors. Equities surged, with the S&P 500 closing out the year with a 23% gain. Even more impressive, this powerful uptrend came after 2023’s crowd-stunning performance of 24%! With so much momentum, it isn’t surprising that skeptical pundits are throwing cold water on 2025’s potential returns. Maybe you’re getting a little nervous, too. I’d caution that view. While it’s never easy to forecast what a market will do in any given year, turning to history often helps. Today, we’ll size up just how rare these monster rallies are… And more importantly, we’ll study the evidence of what’s likely ahead. From a data-driven perspective, you’re going to want to keep riding this bull. Now, let’s understand why… | Recommended Link | | | | Legendary investor Louis Navellier, who correctly predicted Trump’s win… Believes this “day-one” Trump move is about to create a rare opportunity for everyday Americans like you to turn a small stake into real wealth in the stock market. But hurry… After January 20th, it could be too late. |  |
How Often Does the S&P 500 Jump 20% or More? It’s been painful fading the market the last couple of years. The S&P 500 is up a staggering 57% from 2022 to 2024. 
And let’s be clear, this rally has been one of the most hated that I can remember. There’s been countless reasons to sit on the sidelines: - High inflation
- High interest rates
- Earnings growth fears
- U.S. dollar strength
- U.S. budget concerns
Being bullish this whole time was difficult. When you study history, however, you learn that keeping a bullish mindset typically pays off. When you break out the likelihood of annual market returns since 1969, it shakes out like this: - 28.6% of the time, the S&P 500 gains 20% or more
- 26.8% of the time, the S&P 500 gains 10% to 20%
- 16% of the time, the S&P 500 gains 0% to 10%
- 28.6% of the time, stocks are negative
The biggest takeaway here is that, on average, the stock market is positive 71% of the time: 
Being bearish might get likes on social media… But it’s costly. Now, I can’t pretend to know the future. However, history favors the bulls for 2025. Never Short a Double Sharp Market Back in December 2023, we put together a signal study showing how you should never short a sharp market. In rare fashion, the S&P 500 reached the overbought zone, with the 14-day Relative Strength Index closing above 80. We analyzed prior 80-plus readings and found that stocks average 14.5% gains 12 months later. Equities did a lot better, with large caps vaulting 24% over the time period. Given such a steep incline, you may be wondering why I’m still constructive going forward. If you remember back in physics class, we learned Newton’s first law, which states that an object in motion stays in motion… Turns out, similar behavior can be seen in the stock world. Back to 1969, the S&P 500 has gained 20% or more in a year 16 times. For 12 of those years, the following year was positive, a ratio of 75%. And the following year averages a market-beating return of 11.5%. Better yet, these expected gains outpace years when momentum was weaker… and even negative. 
I’d characterize 2024’s breakneck rally as a double sharp market… Be careful shorting powerful momentum! Instead focus on superstar stocks like Broadcom (AVGO), which I discussed last June. This AI behemoth, which you can read more about in the link above, continues to score very high in TradeSmith’s Quantum Score. Even though shares are up 32% since that post, it’s still a buy. Below showcases how AVGO ranks right in the sweet spot both on our fundamental and technical Power Factors. 
Investing doesn’t have to be complicated. Just utilize top-notch analytics. 2025 could be another great year for stocks… especially the outliers. TradeSmith helps you find them! Regards, Lucas Downey
Contributing Editor, TradeSmith Daily Note from Michael Salvatore, Editor, TradeSmith Daily: In case you missed it, I wanted to take a quick moment and share TradeSmith CEO Keith Kaplan’s free buy recommendation during Wednesday’s Breakthrough 2025 event. The stock you should buy on Jan. 17 and take profits on as late as April 17 is… Netflix (NFLX). How do we know? Just take a look at our seasonality data: 
In 14 of the last 15 years, NFLX has posted an average return of 23.75% through this window. With the broad market chopping around as I write, and NFLX off more than 6% from its highs, you’ll want to consider taking action soon. But before you do, I strongly urge you to watch the full briefing from Keith. There, he shows how our breakthrough system could help you double your portfolio by spotting the biggest jumps on 5,000 different stocks before they occur… no matter if it’s a bull or bear market. Plus, another recommendation to avoid a stock with a bearish seasonality pattern coming up soon. Click here for the full details. | 
