The S&P 500 has fallen almost 17 per cent below its 200-day moving average. Photograph: Hiroko Masuike/New York TimesThe S&P 500 is on course for its worst first half to a year since 1970. After such brutal selling, are there any hints a bottom is near?
The selling has been “fairly dramatic”, says Ritholtz Wealth Management’s Barry Ritholtz. The S&P 500 has fallen almost 17 per cent below its 200-day moving average. Only 11.3 per cent of stocks recently traded above their 200-DMA, a “deeply oversold” level. However, volatility, as measured by the Vix index, is “elevated” but not at capitulation levels. The S&P 500′s put/call ratio is higher than average, but not at historical extremes. Miserable consumer sentiment is below levels seen in the 1990 and 2001 recessions, but above 2008 and 2011 levels. Markets are deeply oversold but overall, Ritholtz suspects “we haven’t done quite enough work on the downside to have a true bottom”.
Warren Pies of 3Fourteen Research, who has been rightly bearish in 2022, is slightly more positive. He has been monitoring 10 indicators for signs of a market bottom. Roughly a third of the indicators have now triggered. No longer “outright bearish”, Pies says this is the first time in a while where potential upside matches potential downside. His take: we’re not at levels generally observed at bear market bottoms, but it is time to start “dipping a toe in the water”.
Very bad idea