Risk Happens Fast
On April 10, all three correction criteria flashed red, signaling potential trouble ahead. Since then, the S&P 500 has tumbled 3.75%, while the Nasdaq took an even steeper dive, plummeting nearly 5.5%. The combined analysis of the short term trend, market breadth and underlying momentum has served well in signalling risk.
By the end of last week, the S&P 500 had retraced over half of its year-to-date gains, while the Nasdaq had given back almost all of its yearly advance, now barely up 1.3% from its levels a month ago. Risk happens fast.
It goes without saying the market had a rough week— arguably the worst since October 2022 when considering the weekly decline in the Nasdaq and the six consecutive decline days in the S&P 500.
Is the worst behind us? I remain skeptical. However, given the severity of last week's losses, it wouldn't be surprising to see a relief rally. This week’s note will explore that thought, continued assessment of the potential severity of the corrective move that is underway, and a small note on small cap equities.
Next week continues the earnings season with reports throughout the week from market giants Tesla, Visa, Meta, Google, Microsoft, and Intel. Layered on top of this is the geopolitical tension. As was observed in overnight trading on April 18th— the market is very headline sensitive.
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Correction Criteria Status
The same criteria used to monitor the probability of an impeding decline will remain monitored ‘at a glance’ now as a method to determine if underlying conditions are improving. The three criteria: