There have only been 12x in the past 60 years in which greater than 93% of the trading volume of the SP500 was negative for two out of three days. Only 12x. Yesterday was #12. Trading volumes get quoted in terms of “breadth”. We are currently experiencing extreme negative “breadth”.
Out of the other 11 observations, 10 experienced significantly positive forward returns looking out 3 mos, 6 mos, 12 mos forward. The single observation in which that didn’t occur was in February 2009. During that observation, the market went lower into early March 2009 before recovering sharply. While that observation didn’t have positive 3mos returns, it did looking out both 6 mos and 12 mos.
We are extremely oversold with respect to market conditions and economic demand forecasts looking out 3-6 months are coming down quickly. The 10Y UST needs to peak in terms of yield for stocks to peak in terms of drawdowns. The 10Y UST was at 3.21% at 3am Monday morning. It’s at 2.97% right now. The peak in yield is the likely bottom for stocks. #followtheyield
Chief Investment Officer
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