S&P 500 ROAR Score Surpasses 50: A Potential Bullish or Bearish Signal, or a Combination?
Let's Dive into the Sungarden ROAR Score:
You ever wondered why old-timers always seem to have the knack for playing the stock market like a pro? Well, I made the Sungarden ROAR score to bridge that knowledge gap and help you get in on the action. In a nutshell, it's all about gauging the risk-reward ratio of stocks and ETFs, especially in those choppy markets.
Enter the SPY Dilemma
Last week, the ROAR score for the SPDR S&P 500 ETF Trust (SPY) broke the 50 barrier for the first time since forever. Now, the 10-day smoothed ROAR score is hovering at 28, but it's above the 20 mark for the first time since March. So what's the big deal, right? Well, for starters, it means the odds are leaning more in favor of the bulls for SPY.
Understanding Spot vs. Smooth ROAR Scores
There's a couple of ways to use the ROAR score—the "spot" score is the daily reading for stocks and ETFs. Then there's the "smoothed" score, which combines figures from the past week or two. Both have their own advantages, but the smoothed score gives a clearer picture of what's happening.
Here's what you need to know: the ROAR score estimates the probability of the next big move in a stock or ETF. A score of 50? That means the stock has equal chances of climbing 10% or dropping 10%. But remember, in volatile markets, we might be looking at a 15% or 20% move instead.
SPY: Here's What the Numbers Are Saying
So, let's break down the numbers for the SPY ETF. In just two weeks, the spot ROAR score shot up from its lowest possible level to smack dab in the middle. That's rare, but just when you consider what April dished out, it starts to make sense.
See, in a matter of two months, SPY swung 15% between its worst-case and best-case scenarios. That's more than it moves in some entire years. Talk about a roller coaster!
So, What's a Wise Investor to Do?
First things first, SPY's a wild ride thanks to the trade war uncertainty. So buckle up, buttercup!
But when you factor in the trending neutral spot score and the smoothed score above the 20 mark for the first time since March? That's proof that the ROAR score can help you make smarter decisions, whether you're already knee-deep in research or just starting out. In essence, it tells us "Ease up on the greed, but the risk of a major loss is less compared to the recent past."
Oh, and just a quick disclaimer—20 is the lowest possible smoothed score, and 80 is the highest since any stock has at least a 20% chance of making a huge move up or down at any given time. So yeah, it's smart to consider the wide range of possible outcomes in this day and age of quarterly earnings and wild market swings.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Disclosure Policy here.
Fun Facts:
- The SPDR S&P 500 ETF Trust (SPY) includes stocks of 500 of the largest companies in the United States, providing investors with a broad representation of the US market.
- The ROAR score for the S&P 500 index, another popular benchmark, was at around 15%, indicating a high-risk market with unpredictable movements.
- In March 2021, the SPY ETF hit an all-time high of $454 per share.
- Investing in the stock market can be an exciting way to grow your wealth, but it requires careful planning, research, and monitoring to minimize risk.
- Given the recent increase in SPY's Sungarden ROAR score, a wise investor might consider reducing their greed and recognizing the reduced risk of a major loss compared to the recent past, especially considering the uncertainty surrounding the trade war.
- In the world of finance and investing, technology plays a crucial role in enhancing tools like the Sungarden ROAR score, enabling investors to make more informed decisions by gauging the risk-reward ratio of stocks and ETFs, especially during volatile markets.
