Since their April highs, the major indexes have fallen more than 10%. This is the biggest correction since the rally started in March 2009.
It is also the first time in 216 trading days that the S&P 500 (SPY) has fallen below its 200-day moving average.
The last two weeks brought some horrendous down days and sharp rallies, a pattern reminiscent of what happened in September/October 2008. Is this just a correction or will it morph from correction into meltdown?
When assessing the market’s whereabouts it always helps to take a step back and look at the bigger picture. Did the April highs have some of the symptoms of a major market top?
A look at the data conveys an unmistakable message. In April, we saw the Volatility Index (VIX) drop to the lowest level since July 2007.
The CBOE Equity Put/Call Ratio fell to the lowest level in nearly a decade and the percentage of bullish investment advisors rose to the highest level since December 2007. Investor’s cash allocation dropped to the lowest level since April 2000. What’s the common denominator?
Most extremes reached were the most pronounced since either 2007 or 2000.