Futures Now

An unusual pattern points to more upside in just weeks

The unusual trend which suggests a buying opportunity
Buying opportunity?

An unusual trend has emerged in the stock market, and there's an 80 percent chance it could lift stocks higher within the next month.

That's the latest call from FBN Securities Chief Market Technician JC O'Hara, based on his tracking of a phenomenon regarding the length in time in between so-called distribution days.

"A key distribution day is when ... there are five times as many decliners as there are advancers — as well as five times as much volume in the declining stocks as in the advancing stocks on the day," O'Hara said Tuesday on CNBC's "Futures Now." "When those two conditions are met, you have what we call a 'distribution day.' So, the markets traded 44 days, that's roughly two months without a distribution. Now, to put those 44 days in perspective, the market typically has a distribution day every nine days. "

While the definition is highly technical, the gist is that a distribution day is a session in which it appears that large holders of stock are selling. Those who track them believe that they lend insight into what large investors are doing, which could inform how the market is likely to behave.

After that long 44-day dry spell, an interesting thing happened. The S&P 500 saw two distribution days in a row on Friday and Monday.

"We went back in history and said what happens if you go two months without a distribution day, we have back-to-back distribution days — how does the market react?" he asked.

The answer: a short-term drop followed by intermediate-term gains.

O'Hara, who calls himself bullish, says it's important to watch how the bulls react to any potential pullbacks — since it's been a relatively easy ride for them over the past three months.

If the bulls are resilient and bounce back quickly, then it's a sign that the markets are in a very strong place, he said.

He predicts the S&P 500 could move 6.5 percent higher within a month, putting the index at 2,200.