Goldman Sachs panic gauge signals potential U.S. stock rebound
A sharp U.S. equity selloff has driven one of Goldman Sachs' key market stress indicators into an extreme range associated with medium-term recoveries. The move follows back-to-back declines that traders said produced the largest two-day swing on record for the bank's Vol Panic Index.
Highlights
- Goldman Sachs' Vol Panic Index surged to 9.57 out of 10 on Thursday, breaching the 9.5 panic zone threshold.
- The index's approximately five-point surge marked its third-largest daily increase and, with Wednesday's drop, produced its biggest-ever two-day swing.
- Historically, panic readings at these levels have preceded medium-term rebounds in U.S. stocks, signaling potential market exhaustion to investors.
Record swing pushes gauge into panic zone
As reported by Bloomberg, Goldman Sachs traders said the bank's Vol Panic Index climbed to 9.57 out of 10 on Thursday, moving above the 9.5 threshold that defines the panic zone.The roughly five-point jump was the third-largest daily increase on record, according to traders including Lee Coppersmith. Combined with a steep decline on Wednesday, described as the fourth largest, the move resulted in the biggest two-day swing ever recorded for the indicator.
Market implications for investors
The reading suggests the recent bout of selling in U.S. stocks has reached a level that historically points to a strong rebound over the medium term. That makes the gauge a closely watched signal for investors assessing whether the market rout is nearing exhaustion.The extreme reading does not change the severity of the current volatility, but it indicates panic conditions have intensified to a point that in past episodes has been followed by recovery in equities.
Our earlier article on the Nasdaq-100 (NDX) detailed a sharp intraday selloff that left the index under short- and medium-term moving averages while key resistance held near 29,394. It also highlighted the launch of JQQQ, a blockchain-native fund from Janus Henderson and Centrifuge, as a longer-term structural development even as near-term risk stayed skewed to further downside if support around 29,143 broke.
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