The U.S. stock market is experiencing a liquidation panic where everything is getting sold. The good news is such panics usually don’t last long.
Analysis from Rob Hanna of Quantifiable Edges suggests a rare Inverse Zweig Breadth Thrust (ZBT). Although the sample size is small (n=10 since 1926), the bearish implications of the study are clear.
Take a deep breath. Notwithstanding the fact that negative ZBTs were not part of Marty Zweig’s work as detailed in his book, “Winning on Wall Street,” this study is nearing “torturing the data until it talks” territory. While positive ZBTs are rare buy signals, there have been six instances since the publication of Zweig’s book in 1986. Can you really trust the results of a study when the last instance of a negative ZBT was in 1943?
Panic in the air
Two weekend (unscientific) Twitter polls are testament to the sense of panic. Callum Thomas has been conducting a weekly poll since 2016, and readings are at an all-time low. The weekly reading of equity bearishness has exceeded the levels seen during the COVID-19 crash in 2020, though the four-week average has not.
Market analyst Helene Meisler conducts a similar weekend poll and the results are net bearish by -20%. In the limited time she has conducted this poll, there were only a few instances when…
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