An indicator with a perfect track record says the S&P 500 has bottomed and more gains are coming for stocks

• The S&P 500's 200-day moving average has rallied 1% off its lowest level in more than a year.
• Bespoke Investment Group said that prior periods where the 200-DMA rallied 1% or more from a 52-week low usually indicated "that the low was in."

The S&P 500 may have left its lows in the dust, and one widely watched technical indicator suggests large-cap US stocks should be on track for more gains in the coming year, according to Bespoke Investment Group.

The S&P 500 this year has picked up more than 9%, still recovering after last year's 18% slide. Fronting this year's advance have been the communications services sector and the information technology sectors as they've surged 31% and 27%, respectively. In each group, bets on AI prospects have played a supportive role, with shares of Meta and Nvidia more than doubling.

Those moves have contributed to steering the S&P 500's 200-day moving average higher. The 200-DMA on March 28 hit 3,931.05, its lowest level in more than a year. But since then, it's risen just over 1% above that low, the firm said Monday.

"Like a cruise ship, the 200-DMA doesn't just turn on a dime, so when it starts to shift directions, it's usually a reflection of the fact that the market's longer-term trend has shifted," the firm said in a note.

That should bode well for the stock market that's facing a few challenges including a potential recession and potentially more rate hikes by the Federal Reserve.

The 200-DMA has a "slow-moving nature," said Bespoke. Because of that, the reading has resulted in just 20 periods running back to the late 1920s when the technical indicator made a 52-week low and then rallied more than 1% off that low within the next three months.

But history shows that one year later, the S&P 500's average gain was 18.2%, with gains in all 20 instances. In the earliest period listed by Bespoke, the large-cap gauge starting from March 1933 was up 63.2% a year after its upward bounce. In more recent times, the index starting in July 2016 gained 13.8% over the next 12 months.

"History doesn't always repeat, but prior periods where the 200-DMA rallied 1% or more from a 52-week low usually indicated that the low for the broader market was in," Bespoke said.