Extended periods of selling, waiting for the buy signal
It is no secret that selling in stocks has been extreme lately. In fact, our ratio which measures unusual buying and selling in stocks has indicated that sellers have been in control of this market since 10/5/2018 (more selling in stocks than buying).
We define this by a reading of below 50% in our ratio. Since Oct. 5th, 62 trading days have passed. We took a dive into our data to see prior periods of prolonged selling (like now) and how the market performed once buyers took control.
BOTTOM LINE: No matter which way you look at the data, it bodes well for forward returns once our ratio crosses back above 50% after a sustained depressed stretch. All periods from 1-12 months out have a very high likelihood of positive return for the Russell 2000. Significant double-digit returns kick in from 4 months onward.
​Read the report here.
