Six Wall Street Ideas on What Market Metrics to Watch Right Now

(Bloomberg) -- With benchmark Treasury yields plunging to record lows and U.S. stock indexes slumping into a correction, investors have barely enough time to track broad market gauges let alone secondary ones.

But measures of realized volatility, price swings in currencies and credit, and retail-investor sentiment can all offer insight into financial market direction, as the coronavirus outbreak continues to impact economies, according to strategists.

Here are a selection of market gauges Wall Street is monitoring:

Currency Volatility

Volatility in the foreign-exchange markets and moves in credit are being closely monitored by Kambiz Kazemi of La Financiere Constance, according to an email Wednesday.

“If as the crisis develops we see any signs of a lack of coordination, or as it subsides policy makers starting to lean toward policies which prefer their nations in a recovery, then I think FX will be a battleground and very volatile,” he wrote. Meanwhile, “credit was not as sanguine in its rally as stocks, again showing risk was not appraised the same as equity markets by other participants.”

Measuring Ticks

“One gauge to measure intraday volatility is the NYSE TICK Index that measures positive or negative ticks at any moment in time during a trading day,” said Tony Dwyer, chief market strategist at Canaccord Genuity LLC, in a note Wednesday. “Historically, we view plus or minus 1,400 net ticks on the same day as a sign of extreme volatility.”

Over the past five years, this has happened around a number of important intermediate-term lows and more recently in two of the last three trading sessions, according to Dwyer. “This is yet another indication to us there should be a reflex rally over coming days/weeks.”

Moving Averages

Jason Goepfert, president of Sundial Capital Research Inc., is keeping an eye on the percentage of S&P 500 members that are holding above their 200-day moving average.

“Healthy markets usually don't see this dip much below 40%, and unhealthy ones don't see it rise much beyond 60%,” he wrote in a note Wednesday. “This seems like a worry now because the average reading over the past week just dropped below 40%.”

Read more: S&P 500 Chart Reveals Perfect Symmetry Beneath a Chaotic Market

Retail Sentiment

RBC Capital Markets U.S. equity strategy head Lori Calvasina and Fundstrat Global Advisors LLC co-founder Thomas Lee are watching gauges from the American Association of Individual Investors. Sentiment “has plunged after hitting highly euphoric levels, but isn't yet back to levels that tend to mark major bottoms,” Calvasina noted on Monday. Lee said he's watching the bulls-minus-bears spread, in an email Wednesday.

Seasonal Returns

“A bounce in March is quite possible for stocks after being down the first two months of the year; that's the good news,” said Ryan Detrick, senior market strategist at LPL Financial, in a note Wednesday. “The bad news? The final 10 months have been up only 2.3% on average, while the full year has been lower 4.9% on average.”

That compares with an average full-year return of 19.8% when the first two months of the year have been positive, according to Detrick.

Realized Volatility

“Realized volatility shocks matter because of the sizable capital managed systematically that de-risks when realized volatility spikes,” said Dean Curnutt, CEO at Macro Risk Advisors, in a note Wednesday.

Current levels of relative realized volatility are only about half those seen during the “Volmageddon” period of February 2018, Curnutt noted.

Read more: Volatility Superlatives Piling Up in Week of Shocking Reversals

To contact the reporter on this story: Joanna Ossinger in Singapore at jossinger@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Cormac Mullen, Adam Haigh

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