A Jefferies trader found 6 reasons for stocks to rise. He admitted that the market is already at the bottom
The correction in the U.S. stock market is close to completion, says Jefferies analyst / Photo: Dariusz Gryczka / Shutterstock.com
Michael Toomey, an equity trader at Jefferies, thinks the market may have already bottomed despite the acrimony over the Iran war. "Ma thinks this has been the most painful week in a long time in terms of results, and we're approaching a number of stress levels that usually help the market form a bottom," he told MarketWatch. Toomey cited six signs that suggest stocks could start to rise from current levels.
1. Oil prices are now at the second most overbought level in recorded history, the trader said. The only period when the price rise was more prolonged was during the 1990 Persian Gulf War. If the oil rally stops, that should support stocks, Toomey said.
2. The futures curve for the VIX volatility index, called the Wall Street Fear Index, is now inverted at its steepest since the April shock of Trump's trade duties. Meanwhile, the VIX index itself is at its highest in months.
3 The implied correlation rose 53% this week, one of the biggest moves in years, Toomey points out. This measure reflects how synchronized stocks within an index, such as the S&P 500, move. A sharp rise means that investors are selling or buying the market as a whole, rather than individual companies. Such dynamics are characteristic of periods of panic selling, MarketWatch writes.
4. Strategies based on buying stocks with the strongest performance and selling those with the worst results are starting to recover from a weak three-day performance, Toomey notes. One basket of such stocks tracked by Jefferies has gone from a loss at the open of trading on Friday to a gain.
5. Exchange-traded funds (ETFs) account for a huge share of nominal trading volume. Their share has reached 42% of all trades, which is considered very high, explains the trader.
6. The Fear & Greed Index, calculated by CNN Business, is approaching the "extreme fear" zone. The index reflects investor sentiment in the U.S. market based on seven indicators, including S&P 500 performance, volatility (VIX), demand for protective assets and put/call options ratio. Historically, index levels below 25 have often coincided with periods of panic selling and often preceded short-term market recoveries. Now this indicator is at 27.
This article was AI-translated and verified by a human editor
