It’s Beginning To Look A Lot Like 2011October 15, 2014
It’s been three years since the global developed stock market has had a meaningful correction (down at least 10%). With the recent pickup in volatility, many of our market internal charts are beginning to look like they did in 2011. Unfortunately if this correction (and the MSCI World Index is not yet officially in a correction as it is down just under 10% from its 52-week high) rhymes with 2011, it means that we probably still have a bigger drop ahead of us. Let’s take a look at some charts.
The average stock is currently down 18% from it’s 252-day high. The average stock was down 29% at its lowest in 2011.
We haven’t seen nearly as much volatility. We still haven’t had a single day over the past six months when the MSCI World Index dropped by 2%. In November 2011, we had had 12 2% down days over the previous six months.
We also haven’t seen individual stocks completely fall out of the sky as often. The one-quarter moving average of the ratio of stocks that have either increased by 5% in a day or decreased by 5% in a day stands at 0.75 (i,e. for every 3 stocks with a 5% gap up, there have been 4 stocks with a 5% gap down). This ratio fell to 0.28 in 2011 which was even lower than it fell in 2008 (0.56).
The ratio of stocks making new 52-week highs to stocks making new 52-week lows has sharply fallen to -0.25. This ratio hit -0.35 in 2011.
75% of stocks are at least 10% off its 200-day high. In 2011, it dropped to 92%. 34% of stocks are now 20% off its 200-day high. In 2011, this statistic dropped to 65%.