OPINION: Mark Hulbert has a very simple explanation for why the U.S. stock market plunged on Thursday.
You’ll hear other explanations, such as the risk of a second wave of COVID-19 infections and the Fed’s grim outlook for the U.S. economy. But such factors can’t really explain why the Dow Jones Industrial Average DJIA, -6.89% lost 6.9% while the S&P 500 SPX, -5.89% fell 5.9% on Thursday.
One indicator that helps fill this explanatory void is market sentiment. Only this week did bullishness among short-term market timers start to reach a dangerous extreme; contrarians therefore were not particularly surprised by Thursday’s decline. Consider the average recommended stock market exposure level among several dozen short-term stock market timers that I monitor on a daily basis . Earlier this week, this average rose to 62.5%, which was at the 91st percentile of the distribution of daily HSNSI readings since 2000. That’s just inside the zone of extreme bullishness, as defined by being in the top 10% of such readings—as you can see from the accompanying chart.
We’re far from that now. In the wake of Thursday’s plunge, the HSNSI dropped back just to 53.6%, which is still at the 77th percentile of the historical distribution.
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Here's what happened to the stock market on ThursdayStocks plunged amid concerns over the economic recovery while coronavirus-related hospitalizations in certain states grew.
Read more »
Here's what happened to the stock market on WednesdayTraders continued to rotate out of stocks benefiting from the economic reopening and into mega-cap tech shares.
Read more »
Latest News - MarketWatchGet the latest stock market, financial and business news from MarketWatch.
Read more »