The Stock Market Just Did Something for Only the 14th Time in 45 Years -- and It Has a 92% Success Rate of Forecasting the Direction the S&P 500 Will Move Next

Key Points

• More than 90% of the trading volume and 90% of the stocks on the New York Stock Exchange (NYSE) gained ground on Friday.

• History shows the S&P 500 is almost always higher in the year following this rare occurrence, racking up additional gains of 23%, on average.

• The rally could still stumble, thanks to tariffs or ongoing inflation, but the future looks bright.

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When it comes to investing, this year has been a doozy.

The stock market started off the year with a bang, notching record heights in February, before the S&P 500 (SNPINDEX: ^GSPC) made a stark reversal, plunging 19%. Investors and consumers alike were concerned about the impact of tariffs on the broader economy and whether inflation would reignite, stopping the rally in its tracks.

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However, since the market bottom in April, the rebound has been stunning. Earlier this month, the S&P 500 hit an all-time high and is now within striking distance of a new record.

On Friday, for the second time this year, the stock market flashed a rare signal. More than 90% of the stocks on the New York Stock Exchange (NYSE) moved higher, and the total trading volume of stocks on the exchange was 91%. A "90/90 day," as it is called, has only happened 14 times since 1980 and has a near-flawless track record of predicting what happens next for the S&P 500 -- and the news is decidedly good.

Image source: Getty Images.

History suggests the S&P 500 will gain new ground over the next 12 months

A short primer might help provide some important context. Stock market advancers and decliners are the number of stocks that end a trading session either higher or lower than the previous day's closing price. Some investors keep an eye on these key technical indicators, which help measure market breadth to determine if a rally is broad-based.

For example, a greater number of stocks participating in the gains suggests a stronger rally, and by extension, a more resilient market. While these tools are typically not used by long-term investors, they can provide valuable insight into the short-term trends of the market.

To recap, more than 90% of the stocks in the NYSE closed higher on Friday, and the advancing volume of stocks cleared 91%. This marks just the 14th "90/90 day" for the market since 1980, according to Ryan Detrick, chief market strategist at financial services company Carson Group. His research shows that in the 12 months following these rare occurrences (excluding the two this year), the S&P has risen in 11 out of 12 occasions, notching additional gains of 23%, on average.

This table shows the date the NYSE had a 90/90 day and the returns of the S&P 500 over the coming 12 months:

Data source: Carson Group. Table by author.

As the table shows, the S&P 500 delivered returns of more than 23%, on average, during the 12 months following the occurrence of a 90/90 day. For context, since its inception, the S&P 500 index has returned 8% annually, on average, which shows that the market tends to generate gains well above average in the year following such broad-based volume.

Detrick noted, "These events tend to be quite bullish, with the S&P 500 higher more than 90% of the time a year later and up more than 23% on average."

The fine print

It's important to remember that there are simply no guarantees, as laid out in the old Wall Street adage, "past performance is no guarantee of future results." And there's always an exception to the rule. However, knowing and understanding the data can provide investors with important historical context to inform their investing decisions.

Given the persistent battle with inflation, the rapidly changing tariff landscape, and the continuing question of whether the Federal Reserve Bank will cut interest rates, it's entirely likely that the historic market volatility investors have experienced over the past few years will continue.

This is all a long way of saying that we just don't know what the future will bring, as there are simply too many variables. The good news is that when investing for the long haul, the outlook is decidedly different.

The available evidence suggests that the stock market is likely to continue gaining ground over the coming year. That doesn't mean it won't take a few well-deserved breathers along the way. There's also the very real possibility -- as we saw earlier this year -- that the market could fall precipitously, before resuming its upward trajectory. I'm fairly confident in suggesting that the whiplash-inducing volatility we've come to expect will probably continue.

For those looking to take some of the guesswork out of investing, dollar-cost averaging can simplify the process by helping add to a portfolio on a set schedule and at regular intervals. It also instills an element of discipline that is one of the keys to successful investing, regardless of the daily machinations of the market.

The stock market has generated average annual returns of 10% going back more than five decades. That's why I believe in the power of a long-term mindset and buying and holding stocks for the duration.

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Danny Vena has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.