U.S. Stocks Could Fall Further With ‘Three-Day Rule’ in Play

U.S. Stocks Could Fall Further With ‘Three-Day Rule’ in Play(Bloomberg) — The selloff in U.S. stocks may have at least one day more to go if history is a guide, according to Fundstrat Global Advisors LLC.The S&P 500 has fallen 4.3% over the last two sessions, though remains up 53% from its March lows at the height of fears about the coronavirus. The tech-heavy Nasdaq 100 Index fell 6.4% over Thursday and Friday. Given those substantive declines and the three-day Labor Day weekend, technical strategist Robert Sluymer says there’s a risk of a further downdraft.“We would not be surprised to see the ‘three-day rule’ take effect,” Sluymer wrote in a note. “Steep selloffs often take at least three days to wash out the panic sellers.”Nasdaq 100 futures fell as much as 2.1% in early Asian trading Monday.The sudden back-to-back losses came after a ferocious run-up notable for a rare simultaneous increase in volatility, the outperformance of a few megacaps and unusually heavy options volume. Some strategists see it as simply a removal of froth, rather than a longer-term decline, while Fundstrat’s view remains unchanged that the recent drop is a healthy consolidation, Sluymer said.The Nasdaq in particular tends to fall very rapidly from its peaks, according to Jason Goepfert, the founder of Sundial Capital Research Inc. So if it is really a top, there could be “an almost straight-down move in the weeks ahead,” he warned in a note Friday.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Leave a Reply

Your email address will not be published. Required fields are marked *