Out of curiosity, decided to run it past Grok. Received a lengthy reply. Will paste here only the critical remarks and Conclusions… fwiw.
# Critical Perspective
While the ZBT has a strong historical track record, its effectiveness should be viewed critically. The indicator’s reliance on NYSE data may not fully capture modern market dynamics, particularly the influence of tech-heavy Nasdaq stocks. Its infrequency limits robust statistical validation, and false signals, though rare post-1950, highlight the need for confirmation from other indicators. Structural changes in markets (e.g., decimalization, ETF proliferation, and high-frequency trading) may also reduce its reliability compared to Zweig’s era.
For practical use, the ZBT appears most effective when combined with other technical or fundamental signals, as standalone signals are too rare and lack exit guidance. Investors should also consider macroeconomic factors, such as interest rates or Fed policy, which can override technical signals.
### Conclusion
The ZBT is traditionally based on NYSE breadth but is widely used to predict S&P 500 performance. Studies confirm its effectiveness, with a near-perfect record of predicting 6- and 12-month S&P 500 gains (average ~23–24%) since 1945. However, its rarity, occasional false signals, and reliance on NYSE data warrant caution. Combining the ZBT with other indicators and maintaining risk management (e.g., stop-losses) enhances its utility. For the latest signal (April 2025), historical data suggests a bullish outlook, but short-term overbought conditions may lead to pullbacks. |
