Tariffs have shocked the markets in recent weeks. But stocks were on shaky ground even before President Donald Trump's "Liberation Day" announcement...

The S&P 500 Index peaked on February 19. And by one measure, stocks began showing downward momentum just two days later.

That downward pressure lasted for an additional 42 trading days... the longest streak since 2002.

This is a rare situation. But now, the market has broken its streak. And according to history, that change in trend could lead to a 16% rally over the next year.

Let me explain...

We're living in uncertain times. But investing is always uncertain. You never know for sure where stocks will go next. All you can do is determine which outcome is the most likely.

That's why following the trend is a great rule of thumb for successful investing – because it tells you what's most likely to happen next...

When stocks are moving higher, they tend to keep moving higher. When they're falling, they tend to keep falling.

Plenty of investors fight this fact. It seems too simple. They think investing should be more complicated... But it doesn't have to be.

A Rare Negative Streak Switched to Positive

One way to track the overall trend is with the relative strength index ("RSI"). Usually, we use the RSI to tell us if stocks are "overbought" (an RSI above 70) or "oversold" (an RSI below 30). Those are signs that the market has moved too far, too fast in either direction.

But you can also figure out the overall trend based on this indicator. An RSI below 50 signals a downtrend.

The S&P 500's RSI fell below 50 on February 21... And it stayed below that level for a total of 43 straight days. Take a look...

The RSI tends to swing up and down, even in bull or bear markets. But this multiday streak was continually below 50. And that's darn rare.

We haven't seen such a long stretch of below-50 days since 2002. And overall, there have only been nine similar setups since 1950.

These rare setups are good for stocks, though. The negative momentum can't last forever... So stocks tend to outperform going forward. Take a look...

The S&P 500 is an incredible long-term compounder. It has led to 8% annual gains over the past 75 years. But you can do much better if you buy after setups like the one we just saw.

Similar instances led to 4.7% gains in three months, 6.6% gains in six months, and 15.5% gains over a year. Those are impressive overall returns. And they handily beat a typical buy-and-hold strategy.

What's more, stocks were higher a year later in eight out of nine instances. And the only losing trade was a decline of less than 1%.

Of course, today's situation is different from any we've seen throughout history. But that's always true. Every moment in time is unique... But the worst-case scenario rarely comes to pass.

This is one more setup that suggests the worst of the bust is behind us. And with stocks rallying, it's wise to think about buying.

Good investing,

Brett Eversole