The sell-off in u.s. stocks continued, with the NASDAQ and the s & p 500 both down more than 1% overnight and the Dow down nearly 1%. However, analysts say panic in technology stocks has exceeded March 2020 levels, supporting the market to repair in the future.

Mark Mark Hulbert, a US financial analyst, said Nasdaq-focused indicators of stock market sentiment had reached bearish extremes. His Nasdaq stock investment sentiment index (Hulbert Nasdaq Newsletter Sentiment Index) (HNNSI) has now reached minus 67.2%, indicating that investors are extremely bearish.

Herbert points out that given that HNNSI fell to a low of minus 64.0% in March 2020, the current reading is below comparable readings since 2000 and falls within the bottom 10 of the historical distribution, which is used by some contrarian thinkers to identify extreme bearish sentiment.

At least from the perspective of reverse thinking, there is a big contrast between today's market sentiment and the peak of the dotcom bubble. Herbert says indicators focused on broad stock markets are not as bearish as the Nasdaq-related sentiment index, but it is also approaching a bearish extreme. Herbert's sentiment indicator of the broader market, the Investment Communications sentiment Index (Hulbert Stock Newsletter Sentiment Index) (HSNSI), is 1.6 per cent, down from 89 per cent of all daily readings over the past 20 years.

'that doesn't mean we should now expect the same rebound as the bottom of the market in March 2020, 'Mr. Herbert said. Reverse analysis is at best a short-term market timing tool that provides insight into possible market trends in the next month or two. Nonetheless, given today's extreme bearish sentiment, reverse analysts now expect the stock market to be at or near some bottom.

The rebound that detractors are now waiting for may have begun. If so, how long may it last and how far will it go? Herbert says reverse thinkers often avoid even guessing the answer to the question, instead allowing emotional data to unfold in real time. If the response of market data to any market force is stubbornly bearish, it will be an encouraging sign, and if they jump back to the bullish ranks quickly, it will be a bad sign.

From "buying at low prices" to "selling at high prices"

Investors who chose to "buy on the bargain" during the outbreak do not seem to have replicated this strategy this year. "We have shifted from buying bargain to selling high," said Frank Cappelleri, executive director and technical analyst at Instinet. "

He warns that many areas of the market still fail to meet the oversold conditions described by market technical analysts, which means there may be more selling. "if we continue to get such a closing price, it just shows that the market is not ready to move higher. "

The Instinet analyst said investors need to pay attention to the pattern of highs and lows, and in the current environment, it makes sense to sell rebounding stocks until market conditions change.

The sell-off in the stock market is at least partly due to the prospect of multiple interest rate increases by the Federal Reserve, which is expected to raise interest rates at least three times this year. Higher interest rates will reduce risk appetite for speculative money in the market that relies heavily on borrowing as investors discount future cash flows. Talk of inflation has also had a dampening effect on the market, which is one of the reasons that forced the Fed to shift from loose monetary policy to tightening policy.

Investors try to bet on sectors that are expected to perform better in the coming year, such as finance and energy, but the market rotation is uneven and volatile. The rapid rise in US bond yields has also accelerated this rotation and helped provoke further volatility in the stock market. 10-year Treasuries were flat on Thursday, but short-and long-term bond yields are expected to rise further.