Institution: U.S. Stocks See Two Rare Historical Divergence Signals, 67% Probability of Entering Bear Market in the Next Three Months

BlockBeats News, June 30th - Research firm Ned Davis Research stated that the U.S. stock market has recently seen two historically rare market divergence signals: the Philadelphia Semiconductor Index (SOX) continues to hit new highs while the "Tech Seven Giants" have shown significant underperformance; and the Dow Jones Industrial Average and the Nasdaq Composite Index have exhibited a notable divergence in trends. Historical data shows that such situations often occur near significant market turning points.

The data shows that as of mid-June, on a 26-week rolling basis, the Philadelphia Semiconductor Index has outperformed the Bloomberg "Tech Seven Giants" Index by over 100 percentage points, with the correlation between the two dropping to its lowest level since the end of 2021. Ned Davis Research pointed out that a similar divergence occurred in 2021, followed by the Tech Seven Giants and semiconductor sectors peaking one after another, leading the U.S. stock market into a bear market in 2022.

Meanwhile, in the seven trading days leading up to June 25th, the Dow rose by 0.5%, while the Nasdaq fell by 5%, resulting in a performance difference of 5.5 percentage points between the two. Since the establishment of the Nasdaq in 1971, such a significant divergence has only occurred on about 1% of trading days. Historical statistics show that after such a divergence, the probability of the market being in a bear market in the next three months is about 66.9%, significantly higher than the historical average of 24.8%.

However, the firm emphasized that the above statistical patterns do not necessarily mean that a bear market is imminent. Still, the current market rally lacks broad participation, the divergence between different industries continues to widen, and investors should remain vigilant about whether the above divergences will further intensify and take timely risk management measures.