The Signs of a Market Blip or Something Worse
The bulls probably still rule, but volatility is back and so are ups and downs.
Bloomberg, February 5, 2018, 9:28am
The market sell-off that started last week has made investors nervous. A quick skim of the headlines reflects fears that the bull market is over and that this is more than a mere blip. Futures suggest there will be more red on screens today.
It is too early to definitely declare this the start of a correction (a 10 percent decline that quickly reverses) or the end of the bull market. But rather than rely on gut instinct, we should instead look at the data to help us understand the details of this rally. It is as a good time as any to discuss how market tops and bottoms are made, and why they tend to be such different events.
Let’s begin with a few stunning data points: before last week, the Standard & Poor’s 500 Index had gone 112 trading days without closing down 1 percent in a single day. That is the longest such streak in more than three decades.
The S&P 500 hasn’t had a two-day 2 percent decline since September 2016. That was 349 days before the most recent prior fall. Similarly, U.S. markets haven’t seen a streak that long without a 2 percent decline in more than three decades.
Continues at: The Signs of a Market Blip or Something Worse