After Monday's Sell-Off, Watch Out For These 4 Buy Signals

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by: Real Vision
Summary

The S&P’s biggest one-day drop of the year on Monday was not particularly uncommon in percentage terms, according to DataTrek Research co-founder Jessica Rabe.

The 3% dip “seemed like a big move” but it “really takes a down 4% day” on the S&P 500 before you can find an investable entry point, she said.

To figure out when the bottom of equities has actually been put in, there are 4 key signs Rabe advises investors to look out for.

DataTrek co-founder Jessica Rabe appeared on Real Vision’s Trade Ideas to reassure investors that the S&P’s biggest one-day drop of 2019, on Monday, wasn’t particularly unusual in historical terms.

She pointed out that volatility has been uncommonly low, and so Monday’s dip of around 3% seemed more dramatic than it actually was. “It really takes a down 4% day on the S&P 500 before you can really find an investable entry point,” she told Real Vision’s Alex Rosenberg.

Signs of A Low

Rabe shared four data points DataTrek is monitoring for signs of a low in equities. If all four signs flash, that will be a “buy” signal for investors, she said.

The first sign would be the VIX going above 30. For context, the last time it hit 30 was December of last year.

A second signal would be “to see Fed Funds Futures start pricing over 50% of a 50 basis point cut in September.” Only when it gets to 50% will markets really be convinced the cut is happening, Rabe said.

Third and fourth, Rabe says you “really want to see China’s currency start to stabilize,” and “bitcoin to start dropping.”

Despite the uncertainty, Rabe said: “We’re still bullish on the year. As long as you have falling interest rates, even though earnings are stagnant, we can certainly be up on the year.”

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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