Is a Stock Market Crash Imminent?

There have been recent pieces of writing discussing the chance of a significant decline in the stock market before this year comes to a close. Certain points raised include the worldwide economic deceleration and the possibility of overvaluation in AI stocks. Nevertheless, let's examine the graphs to gain a more comprehensive comprehension.

To begin, let's examine the S&P 500's volatility index (VIX), a metric that predicts the anticipated market volatility over the next month. Although volatility can potentially lead to an upward movement, the present low readings of the VIX indicate that investors do not anticipate any major market fluctuations in the upcoming weeks. This should not be interpreted as a sign of an impending market crash.

An additional handy graph to consider is the put-to-call ratio specifically for the technology-focused NASDAQ 100 Index. A notable ratio suggests unfavorable feeling among investors as they purchase more put options to safeguard themselves against a potential market decline. The present ratio of 1.61 does indeed show some negative sentiment; however, it has been even higher in previous instances. This doesn't necessarily imply that technology stocks are emitting warning signals.

Prior to a major downturn, it is crucial to identify significant levels of support in the market. As an illustration, in the FTSE 100, purchasers have continually intervened to make purchases at approximately 7,200 points or 6,800 points in the previous few years. Even if the market declines beneath 6,800 points, it could potentially offer a chance to acquire underpriced stocks within the FTSE 100.

Although there are talks about a possible stock market collapse, the present graphs and levels of support do not suggest an upcoming crash. It is important for investors to carefully analyze the information and avoid rushing into judgments driven by fear.