Stocks May Be Down, But They Aren’t Out – At Least Not Yet

 

Investors did a pretty good job of wiping out about $700 billion in market cap from the S&P 500 on Friday. I’m not sure what the correct multiple should be for what amounts to roughly $165 billion in tariffs per year. Of course, that is assuming that all $550 billion in China exports to the US goes to a 30% tariff rate. However, the sell-off seems a bit overdone to me.

Premium content: Market In Precarious Spot

The Road To Nowhere

Whatever the case, the S&P 500 is now down about 1% from its January 26, 2018, levels, and about 6% off its all-time high. I think the more important number here is the 1% because it signifies just how the market has gone nowhere over the past 21 months.

It isn’t the lack of performance that is exhausting; it is the volatility.

Bollinger Bands

I usually don’t reference Bollinger Bands much, but I love to use the Bollinger Bands width as a measure of volatility. Naturally, when the bands are expanding volatility is rising, and when the bands are contracting volatility is falling. The good news is that the Bollinger bands current width is at the upper of the historical range. It would at least suggest that volatility is likely to settle down.

Stocks May Be Down, But They Aren't Out - At Least Not Yet

RSI

Meanwhile, the RSI is still generally trending higher, since the December lows, another positive for the longer-term. But it does also suggest that there could be just a bit more downside over the short-term.

S&P 500, spx, Stocks May Be Down, But They Aren't Out - At Least Not Yet

Percent of Stocks

Also, the percent of stocks in the S&P 500 above their 200-day moving average is right around 50%. Which, as you can see from the chart below is a pretty significant level.

VIX

Also, it is worth noting that VIX never got to levels that we saw at the beginning of the month.

vix

Yields

Additionally, the 10-year bond stayed above its previous lows.

10-year

Gold and TLT

Meanwhile, Gold failed to make a new high, and the TLT has now made a lower high.

Risk Aversion Trade?

1 2
View single page >> |

Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice when the market changes. I am not right all the time and I do not expect to be. I ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.