A backtest combining equity breadth, rates volatility and credit conditions suggests weaker forward returns when US equities are close to records. The screen requires the S&P 500 within 5% of its all-time high, the MOVE at least 80% of its 52-week high, the HYG-to-Treasury index ratio below its 50-day average, and NYSE net new highs below zero. Over the next 120 days, the S&P 500 averaged a 0.5% gain versus 4.5% for a typical “near-the-high” day, and 54% of signals were followed by gains compared with 75% normally. Drawdowns were larger: a 10%+ drop occurred 42% of the time versus 22% normally, while 5%+ declines happened 54% versus 38%; nearby parameter tweaks (2/3/5/10% from highs, MOVE at 70/80/90%, net new highs below 0/-50/-100) still produced 120-day underperformance of 2% to 10% when there were at least five signals.
Signals tended to cluster: 2007 preceded the financial crisis, 2015 came before the 2015–16 correction, 2021 ahead of the 2022 bear market, and 2019 proved a false alarm until Covid in 2020, with a 20-day lockout causing overlap in 60- and 120-day windows. Current readings were described as strong, with a 10-day average of net new highs at -108, worse than 92% of past signal days; MOVE was near its yearly high, while spreads were milder than in most prior signals. Separately, EURUSD was said to have retested 1.1270/20, with prior levels at 1.1270/1.1320 and a high at 1.1277, while positioning was described as long USD, pointing to choppy EURUSD and EURCHF with a downward bias; French spreads were characterised as not yet wide enough to justify fresh euro lows.
Equity Market Signal Clusters And Drawdowns
Signals tended to cluster: 2007 preceded the financial crisis, 2015 came before the 2015–16 correction, 2021 ahead of the 2022 bear market, and 2019 proved a false alarm until Covid in 2020, with a 20-day lockout causing overlap in 60- and 120-day windows. Current readings were described as strong, with a 10-day average of net new highs at -108, worse than 92% of past signal days; MOVE was near its yearly high, while spreads were milder than in most prior signals.
European FX And Spreads Context
Separately, EURUSD was said to have retested 1.1270/20, with prior levels at 1.1270/1.1320 and a high at 1.1277, while positioning was described as long USD, pointing to choppy EURUSD and EURCHF with a downward bias; French spreads were characterised as not yet wide enough to justify fresh euro lows.
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