Wednesday, July 6, 2022

When Can The US Enter The Stock Market With Peace Of Mind? Keep An Eye On These 6 Market ‘Capitulation’ Signs

Market strategists and technical analysts believe that although US stocks have declined further recently, the time to enter the market is not yet.Associated Press

The US stock market has been on a tear as of late, and while this is the current wave of declines, the end result is oftenInvestmentPeople in a panic killed their holdings and “surrendered”. For calm investors with cash ready to enter the market, it may be time to start buying with confidence.

Financial website MarketWatch reports that market strategists and technical analysts believe that now is not the time to enter the bargain market, so you can also pay attention to the following six signals you encounter:

1. The tide of disinvestment has reached its peak

Investors have poured $1.5 trillion into mutual funds and ETFs since early 2021, and have pulled out only $35 billion so far, “it’s not a surrender,” said Hartnett, chief investment strategist at Bank of America (BofA). believe it’s going to bleed about $300 billion to see the fund go quickly, andstoreThat’s about 55% of the portfolio, down from 63% right now.

Second, “panic”index‘ Above

The CBOE Volatility Index (VIX), commonly referred to as the U.S. What is known as the “fear index” of stocks has recently risen to 35, reflecting heightened fear in the market. However, Dahl, chief investment officer at Crossmark Global Investments, believes that this level has not yet reached a level that marks the moment of “surrender”, and it has to be closer to 40 for “panic”. needed. He also predicted that more stocks would drop below 52-week lows and moving averages.

3. Increased Call-to-Call Ratio

Investors buy “puts” when the market is bearish and “calls” when they are bullish. So, look at the put/call ratio to see how scared investors are. If this indicator rises, it means that the fear level in the market has increased. Ramsey, chief investment officer at Leuthold Group, analyzed historical data for three-day averages and found that since 2014, when the market “capitulated” and bottomed out, the ratio would be 0.85 or higher. The most recent ratio is about 0.7. , so it shows that “Investors are scared right now, but not really panicking. I don’t think the final low is near.”

Fourth, the number of shares sold by jumping off the building has increased

McDonald’s, founder of Bear Traps Report, identifies moments of “capitulation” in the market by tracking how many notch stocks are in deep downtrends. Specifically, it remains to be seen whether the proportion of stocks listed on the New York Stock Exchange (NYSE), whose share prices are still higher than the 200-day moving average, have shrunk sharply. Presently this ratio is around 28%.

Fifth, the selling pressure is over

Pullin, publisher of the investment newsletter “Intermarket Review” and author of “Investment Psychology Explained,” said that the “selling climax” is a key feature of a market’s “capitulation”, when the market often experiences a drop in volume. , This could have happened in early trading, when stocks fell, then recovered from their lows, and then the market seemed relatively calm. So far, no sign of this has been seen.

Six, the financial balance fell sharply

A sharp drop in margin debt in securities trading accounts could be a sign of “capitulation”, said Goldman Ford, founder of market analysis firm Sentiman Trader. But what counts as a “big” shortcoming? Their definition is “a decline of more than 10 percent year-on-year”. The current decline is just 3% to $799 billion.

Gold Ford itself tracks a total of 12 “capitulation” indicators, and has so far reached only three: the IPO market has dried up, stock funds have been bleeding billions of dollars for several weeks, and investor confidence surveys. Turns out that confidence has dropped to 2.5%. very low level. Other metrics don’t qualify as “capitulation,” such as at least 40% of NYSE stocks falling to 52-week lows (currently close to 30%), and less than 20% of S&P 500 stocks. are still above their 200-day moving. The correlation between the average, and the S&P 500 components, increased.

In short, once investors become extremely frustrated with stocks and want to sell them all, it should be a sign that the bearish environment has reached its peak.

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