Signaling a rebound? Goldman Sachs' U.S. stock fear index has reached "extreme levels."

Goldman Sachs' panic indicator has hit historically extreme territory. Historical data shows this often signals medium-term rebound opportunities, but traders caution that the market is still in the process of finding a bottom. On Saturday, Goldman Sachs Group traders said that the sharp selloff in U.S. stocks has pushed market panic to extreme levels. The bank's volatility panic index surged to 9.57 on Thursday (out of a maximum of 10), breaking through the "panic zone" threshold of 9.5, with the single-day gain being the third-largest on record. Combined with Wednesday's sharp decline, the two-day cumulative volatility range set a record for the largest in history. Goldman Sachs historical data shows that each time the index previously broke through the 9.5 threshold in 15 instances, the S&P 500 rose an average of 4.6% over the following three months, with a hit rate of 80%; over the six-month horizon, the average gain was 9%, with stocks rising in 73% of cases. On Friday, U.S. stocks had already rebounded, with the S&P 500 rising 0.7% as dip buyers entered amid improving economic data. Two-day volatility sets historical record, panic sentiment rapidly intensifies Goldman Sachs trader Lee Coppersmith said the two-day cumulative volatility range was the largest on record, "fully illustrating how quickly the market shifted from relief to outright panic." According to Goldman Sachs trader analysis, this sharp reversal stemmed from massive demand for downside protection ahead of Tuesday's U.S. midterm elections. Investors had previously sold off hedge positions during the post-election rally, leaving portfolios severely underprotected when stocks turned lower. As share prices fell and hedge fund forced liquidations spread, investors scrambled to buy back the protective positions they had just sold, further exacerbating market volatility. Options market panic signal: put option volume hits all-time high This concentrated burst of hedging demand left a clear mark on the options market. Cboe put option volume on Thursday exceeded 11 million contracts, setting a single-day all-time record and surpassing the previous peak in April 2025. Among them, index put options contributed the majority of volume, while single-stock put option volume also ranked fourth-highest in history, highlighting the high concentration of demand for broad protection. Coppersmith noted that "yesterday's move was less about deteriorating fundamentals and more a reflection of an extremely poor technical setup and forced re-hedging pressure." Historical patterns point to medium-term opportunities, but short-term caution still warranted Although historical data presents relatively optimistic medium-term signals, Goldman Sachs traders still advised investors to remain cautious. They noted that as the market continues to find a bottom, there is still more positioning to be digested. "As forced selling gradually subsides, the market's allocation appeal begins to rise," Coppersmith wrote. "This doesn't necessarily mean rushing back into risk assets, but the potential opportunity on the other side is becoming increasingly difficult to ignore." Goldman Sachs' analysis suggests that extreme volatility and forced selling may ultimately create entry opportunities for investors willing to look past short-term turbulence, but only on the condition that the market completes the current deleveraging process. This article is republished from the "Wallstreetcn" APP, author: Zhao Ying; GMTEight editor: Song Zhiying.