Investors are looking for signs the selling in the U.S. stock market may have reached a crescendo, but say that the check marks are not yet all ticked and there is room for further pain. The US President’s announcement of sweeping tariffs on Wednesday extended U.S. stocks’ selloff this year with the S&P 500 down 12% from its February record high and the tech-heavy Nasdaq index .IXIC down 18% – close to being in a bear market. Still, few see a market bottom.
While investors don’t always agree on what indicators best signal a capitulation, most look at a handful of measures of investor sentiment and selling pressure. These include the options-based Cboe Volatility Index .VIX , options indicators such as put-to-call ratios and technical barometers, including indicators of market breadth. For one, the VIX, dubbed the Wall Street “fear gauge” remains shy of the levels hit at market lows.
In the last 10 instances when the S&P 500 experienced a correction – a fall of 10% or more from a recent high – the VIX on average touched a peak level of 37 before the selling was done. The index closed at 30.02 on Thursday, its first close above the 30 level in 8 months, showing increased investor anxiety but possibly not yet at capitulation point. Measures of market breadth, including the number of stocks down versus up, also remain below extremes. On Monday, about 81% of S&P 500 constituents finished in the red. Historically, one-day declines of 4% or more for the S&P, have not been sure-fire markers of market bottoms, Thrasher said.
A key hindrance to buyers stepping in is the continuing uncertainty on how other countries will react to the tariffs. Much of the market’s near-term outlook hinges on how the tariffs drama plays out, but investors are not counting on a swift resolution.
Reporting by Saqib Iqbal Ahmed; Additional reporting by Laura Matthews, Sinead Carew, Chuck Mikolajczak and Lewis Krauskopf; editing by Megan Davies and Sandra Maler.
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