The stock market is seeing more ‘90% days.' Here's what that means for your money.

The S&P 500 experienced a "90% down day" on Wednesday, marking the fourth such volatile session in the past month, with two up and two down days. According to Lawrence G. McMillan, an increase in the frequency of these high-volatility days, where either declines overwhelm advances or declining volume significantly outpaces advancing volume, is historically a bearish signal for the stock market. Despite this short-term volatility, McMillan notes the S&P 500's upside target remains near 6,150.

Analysis

The U.S. stock market has recently exhibited increased volatility, evidenced by a "90% down day" in the S&P 500 on Wednesday, where either declining issues outnumbered advancing issues by nine to one, or declining volume similarly outpaced advancing volume. This event marks the fourth "90% day" in the past month, with an equal split between up and down days. According to Lawrence G. McMillan's opinion, such an uptick in the frequency of these extreme breadth days is historically a bearish indicator for stocks, signaling potential market weakness despite a stated S&P 500 upside target near 6,150. While the article mentions that "volatility favors the bulls for now," the primary takeaway from McMillan's analysis, supported by data since 1998, is that a sustained period of numerous volatile days characterized by these 90% metrics warrants caution.

Key Decisions for Investors

• Investors should monitor the frequency of "90% days" as a significant technical indicator suggesting potential increased market fragility, despite any prevailing short-term upside targets.
• Given the historical bearish implications of frequent extreme breadth days, portfolio managers might consider reviewing risk exposure and evaluating the need for defensive strategies or hedges against heightened volatility.
• The occurrence of four "90% days" (two up, two down) within a month suggests a choppy market; therefore, be prepared for continued volatility and assess whether current positions align with such an environment.