Four Simple Charts to Follow the Global Stock Market Correction

One way in which we can measure the intensity of a corrective phase in the markets is to calculate the percent of stocks that are trading within various tiered ranges of their 200-day high. The way we do this is to create four buckets of stocks:

1. Percent of stocks trading within 10% of their 200-day high (dark blue line)
2. Percent of stocks trading between 10-20% of the 200-day high (red line)
3. Percent of stocks trading between 20-30% of the 200-day high (light blue line)
4. Percent of stocks trading further than 30% from the 200-day high (black line)  

If we observe that bucket 1 is obviously becoming smaller while buckets 2-4 are becoming bigger, then we know that stocks are moving into a corrective phase. When bucket 4 is the largest bucket, then most stocks have suffered deep losses, and it's usually not until the black line starts to turn lower again that the losses are close to being over.

So where do we stand currently? From the charts below we can see that bucket 1 (the dark blue line) is starting to turn lower while bucket 2 (the red line) is turning higher. In other words, more and more stocks are moving into a corrective phase. The corrective phase has taken root primarily in Europe and least so in Asia. North America is somewhere in the middle. In Europe, the percent of stocks that are either in a correction or a bear market (buckets 2-4) represent 68% of the total, so we know that the selloff in Europe has been widespread. In North America and Asia the percent of stocks in a correction or a bear market is only 35%.