S&P 500 ROAR Score Passes 50: Is this signaling a Bullish or Bearish Market... or a Combination?
Get Ready to Navigate Volatile Markets: Understanding SPY's ROAR Score
In the realm of investing, I invented the Sungarden ROAR Score to shake things up a bit. After years of managing money, I realized that the traditional "buy, sell, hold" approach didn't cut it. The ROAR Score aims to fill the gap in the way investors approach buying and selling stocks, shedding light on potential price movements.
Want to get a glimpse of the importance of the ROAR Score? On May 1, the ROAR Score for the SPDR S&P 500 ETF Trust (SPY) surged above 50 for the first time in a couple of months, indicating that the odds are shifting in favor of SPY bulls. Let's dive into the ROAR world and figure out what this means for you.
Decoding Spot vs. Smooth ROAR Scores
There are two ways to leverage the ROAR Score: the "spot" score, which is the most recent reading for stocks and Exchange-Traded Funds (ETFs), and the "smoothed" score, which averages the ROAR figures over a period of roughly a week or two.
So, what do these scores mean? Simply put, they help predict the probability of the next significant move in a stock or ETF - that's a 10% jump, just like that!
In tumultuous markets, the "big" forecasted move could be more than 10%, potentially 15% or even 20%. When SPY's spot ROAR score crossed 50, and the 10-day smoothed ROAR score surpassed 20 for the first time since March, it's safe to say that the SPY ETF now appears a bit more bullish.
Reading Between the Lines of SPY's ROAR Scores
In the past two weeks, the spot ROAR score for the SPY ETF has moved from its lowest possible level to the middle of its range. Unusual, you say? Not when you consider the rollercoaster that was April.
Over the past 10 trading days, SPY had gained more than 7%, but lost 8% over the previous 50 trading days. That's a whopping 15% shift between the two markers, exceeding typical yearly moves for SPY.
So, what should you do with this information?
- Brace Yourself: SPY is, without a doubt, volatile, largely due to trade uncertainty. So, it's time to buckle up.
- Embrace the ROAR: A ROAR score that's trending towards neutral on a spot basis while showing a hint of the 20 mark on a smoothed basis indicates that it's not the time to be greedy and the risk of major loss has decreased compared to the recent past. But remember, a score of 20 is the absolute minimum for the smoothed score, and 80 is the maximum, as any stock has at least a 20% chance of experiencing a significant move in either direction in this era of quarterly earnings reports and heightened volatility.
In conclusion, the ROAR Score serves as an essential tool for investors in need of risk assessment, especially in choppy markets. It's all about understanding the odds and making informed decisions.
Note: At the time of publication, Rob Isbitts had no positions in the securities discussed in this article. For more information, please view the Disclosure Policy here.
[1] Source: Sungarden[2] Source: Investopedia[3] Source: Seeking Alpha[4] Source: InvestorPlace
- Investors should pay attention to the Sungarden ROAR Score, a tool that aims to predict significant price movements in stocks and ETFs, like the SPDR S&P 500 ETF Trust (SPY).
- When the spot ROAR score for the SPY ETF crossed 50 and the 10-day smoothed ROAR score surpassed 20, it suggested that the SPY ETF may be becoming more bullish, potentially indicating a larger-than-typical move in either direction.
- In the past, a ROAR score trending towards a neutral spot value, while showing a hint of the 20 mark on a smoothed basis, might indicate that it's not the time to be greedy and the risk of major loss has decreased.
- As technology continues to evolve and market volatility increases, tools like the ROAR Score can provide investors with valuable insights to make informed decisions and navigate choppy markets more effectively.
