The bull market is over! Analysts: or need to turn to defensive stocks
1min read Investors are re-experiencing volatility after a recent stock market shake-up that ended a long period of calm. According to sentiment trader Jason Goepfert, the volatility could trigger a “turnaround” in market sentiment.
The S&P 500 index has seen daily intraday swings of at least 1 per cent in each of the past eight trading sessions, driven by unwinds of yen carry trades and concerns about the US economy, which have roiled global markets over the past two weeks.
In a report on Monday, Mr Goepfert noted that the average daily intraday swings in the S&P 500 over the past 10 trading days were at least 2 per cent, the largest 10-day average intraday swings in a decade.
The chart below shows the intraday swings in the S&P 500 since 1957. “The 2 per cent threshold includes most ‘normal’ 10-day average intraday swings,” Mr Goepfert said. Swings of more than 3 per cent in 10 days have only occurred a few times, and “full-blown” swings have only happened three times.
The recent volatility also ended the S&P 500’s record for the longest period without a 2 per cent intraday swing, increasing the likelihood of a market sentiment “turnaround”. “It’s the first time in 430 trading days that investors have experienced a 2 per cent intraday swing,” he said.
The table below shows how investors have reacted to intraday swings since 1962.
Typically, sharp increases in intraday swings would lead to a temporary pullback in the market, followed by a few weeks of market churning before the trend resumed. However, Mr Goepfert noted that historical precedent for this argument is weaker in recent years, particularly over the past 25 years. “The 2011 and 2015 spikes in intraday swings provided good entry points for long-term investors, but otherwise the risks outweigh the rewards.”
Mr Goepfert added that he would be watching how investors reacted to the “panic” in the market. “If we see a lower low in the S&P 500, we should be wary that we may need to turn defensive.”