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This is stocks' worst momentum swing in history

Bloomberg logoBloomberg 2/9/2018 Luke Kawa and Dani Burger

Video by Wochit

Oh, how quickly the good times soured.

The S&P 500 Index’s 14-day relative strength index -- a technical gauge of the magnitude and speed of price movements -- has swung 57 points lower over the past two weeks.

a screenshot of a video game: An Historic Reversal © Provided by Bloomberg LP An Historic Reversal

"The journey from ecstasy to agony is entirely unprecedented, in the United States at least," writes Bloomberg macro strategist Cameron Crise, who earlier noted this inauspicious achievement. "That’s the largest momentum swing in history -- and it’s not particularly close."

The next-closest reversal was a 48-point drop over the same span in 1987.

"This is perhaps one reason to expect that an eventual market recovery might not be totally straightforward," added Crise. "Not only have ’those kids on the trading desk’ never seen a reversal like this, nobody has. How that impacts investor psychology remains to be seen."

It’s little wonder, then, that the Societe Generale Commodity Trading Advisors Index is in the throes of its worst five-day performance since 2007 as of Wednesday.

a screenshot of a video game: The Trend Was Not Their Friend © Provided by Bloomberg LP The Trend Was Not Their Friend

While such managers own more than just equities, their trend-following, momentum-friendly strategies just got taken to the woodshed.

U.S. stocks closed at a record on Jan. 26, a day when about 40 percent of S&P 500 constituents were overbought and 0.8 percent oversold. As of now, that’s been totally changed around -- 0.4 percent of the gauge’s components are overbought, while roughly one-third are oversold.

Nandini Ramakrishnan of JPMorgan Asset Management says this volatility was expected.

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