LIVE MARKETS S&P 500: Enough downside, or just the beginning?

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Dec 7 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

S&P 500: ENOUGH DOWNSIDE, OR JUST THE BEGINNING? (0900 EST/1400 GMT)

In the eight trading days from its November 18 record close to its December 1 finish, the S&P 500 index (.SPX) suffered a 4% setback,

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Since then, it has mounted a choppy recovery. However, with CME e-mini S&P 500 futures pointing to a more than 1% rise in early trade Tuesday, the benchmark index could be on track for back-to-back up days.

Meanwhile, the 5-day moving average of the CBOE equity put/call (P/C) ratio, which can be viewed as a contrarian measure of sentiment, has now risen to 0.592, which has it matching its May 14 high. That high was also just after the SPX completed a 4% slide, although in that case over just three trading days:

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Of note, since bottoming at 0.402 in mid-June 2020, the P/C measure has ranged between high-30% and low-60% readings. If this pattern is to continue, then the measure could be signaling that market sentiment may have become sufficiently bearish. If so, the SPX may have found, or could be very close to, a low.

However, also of note, for around 20 years, from 2000 to 2020, the measure's range was mostly in the 50% to 90% area. It has only been post the COVID-crash, that the P/C measure's range has shifted down to similar levels that led up to the tech-bubble peak in 2000.

Therefore, traders will be watching to see if the P/C measure is to turn down, and oscillate back below 0.4. A breakout much above the low-0.60 area may signal panic. The measure peaked at 1.05 on March 17, 2020, in what was a more than 30% S&P 500 collapse.

(Terence Gabriel)

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Terence Gabriel is a Reuters market analyst. The views expressed are his own

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