S&P 500 ROAR Score Breaks 50. Is This Bullish or Bearish... or Both?

I created the Sungarden ROAR score using raw data from Barchart for one main reason. After decades of managing money, I felt that how many investors considered buying and selling stocks was lacking. I noticed too much emphasis on the “buy, sell, hold” spectrum. With the ROAR score for the SPDR S&P 500 ETF Trust (SPY) crossing from below 50 to slightly above it on Thursday, May 1, it provides a perfect opportunity to understand why the ROAR score matters. Let’s see what ROAR is trying to tell us now. Understanding Spot vs. Smooth ROAR Scores There are many ways to use ROAR, including the “spot” score, which is the latest reading, taken daily on stocks and exchange-traded funds (ETFs). Then, there’s the “smoothed” score which blends ROAR figures over the past week or two and typically provides a stronger indication. Indication of what? As described here previously, ROAR is all about one thing: Estimating the probability of the next big move in a stock or ETF. A ROAR score of 50 says that a stock has an equal chance of going up 10% before it drops 10%. In volatile markets, however, it may be necessary to consider that the “big” forecast move could be 15% or 20% instead of 10%. SPY’s spot ROAR score crossed just above 50 for the first time in a couple of months. And while the 10-day smoothed ROAR score is still only at 28, it is above the 20 threshold for the first time since March. The bottom line from that quick set of statistics is that the odds are moving more in favor of SPY bulls. How to Understand SPY’s ROAR Scores NowIn just about two weeks, the spot ROAR score for the SPY ETF has moved to the middle of its possible range from its lowest possible level. That’s unusual, but not when we consider what the month of April presented. Through Wednesday’s market close, SPY was up more than 7% in the previous 10 trading days, yet down 8% over the past 50 trading days. In other words, there was a 15% swing in roughly two months between those two goalposts. That is more than the SPY moves in some entire calendar years. What Should Investors Do With This Information? First, investors must accept that SPY is subject to a great deal of volatility due to tariff-driven uncertainty. This means it’s time to buckle up. Second, a ROAR score that is both trending toward neutral on a spot basis, yet peeking its head above the 20 mark on a smoothed basis, is proof of how ROAR can help investors supplement the research they are already doing using the Barchart platform. It essentially tells us “don’t get too greedy, but the risk of major loss is reduced versus the recent past.” Note that 20 is the lowest possible smoothed score and 80 is the highest, since any stock has at least a 20% chance of moving much higher or lower at any time. Why? Because in this era of quarterly earnings reports and outsized volatility, investors need to consider a much wider range of possible outcomes. On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.