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Bulls' nightmare week

Jason Goepfert
2020-02-26

Historic selloff

This is one of those times that happen every few years when we could spend page after page listing extremes. It’s not quite to the extent of Christmas Eve 2018, though. 

If we distill the most important part of the moves over the past two days, it likely comes down to the shock dealt to investors that had not witnessed this kind of price action in years, if ever. Just a few sessions ago, stocks were sitting at all time highs, and the discussion was about how resilient stocks are. Now, there are whiffs of panic. 

That can happen when stocks go from sitting at all-time highs to wiping away more than two months of gains in less than a week. It hasn’t happened very often.
S&P goes from high to 2 month low

Historical comparisons like this always generate “actually…” kinds of comments. We’ve never had a period with such aggressive Fed manipulation. Or passive investing demand. Or a global pandemic. Or, or, or. As always, every moment in the market is unique, and there is never an exact precedent.

But if we look at behavior through various prisms, sometimes a consistent pattern will emerge. We're seeing that with many of the studies that have triggered over the past two days.


Double down

Among many extremes, selling pressure has been intense over the past two sessions. On the NYSE, more than 90% of issues fell on Monday and Tuesday:

90% down day

There have only been a few other historical cases with 2 days of such widespread selling. Historically, the S&P rallied over the next 2-12 months.

Consecutive 90% down days

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We also looked at:

  • The S&P suffered consecutive 2 standard deviation losses
  • A bunch of S&P stocks are below their lower Bollinger Bands
  • Almost all of them are below their 10-day moving averages, too
  • What happens after the S&P pulls back 7% for the first time in over a year
  • The "old VIX" spiked above 30 for the first time in a year
  • What happens when the VIX gets this overbought
  • SPY volume has spiked
  • Energy sector breadth is showing signs of a true extreme