S&P 500: Month End
Thinking about healthy pullbacks
Zooming Out: Year-to-Date Market Recap
As we close out the month and approach the halfway point of 2025, this note zooms out to provide a year-to-date perspective before ending with updates on all active trade ideas.
January kicked off with strength, pushing markets to new all-time highs. February followed suit, with the S&P 500 closing at a peak of 6144. But under the surface, cracks began to show. This newsletter flagged “little room for error” in early February as the first signs of deterioration emerged. On February 21, the first risk-off alarm of the year was triggered—trend, breadth, and momentum all broke down. What followed was a sharp correction: the S&P 500 dropped 19.5% over the next six weeks.
At the time, my correction target was 5250. The index overshot that, reaching an intraday low of 4835 in early April. By mid-April, however, sentiment and US equity positioning pointed to the formation of an intermediate low. This combination has consistently provided valuable context in identifying bottoming setups—and remains my most effective way to quantify the “buy fear, sell greed” adage.
From that April low, the rally gained traction and eventually led to a shift in my primary outlook: a constructive advance toward new all-time highs. The last two letters noted how momentum had stretched—like an elastic band—too far in the other direction. A reversion, either through time or a pullback, was expected. That pullback appears underway, with the S&P 500 now testing the short-term moving average. A healthy bounce from this zone would support the bullish thesis. Any close beneath it will be closely monitored.
The strategy remains the same: participate in the advance with a risk framework defined by the risk-off criteria. If all three criteria are triggered again, the alarm is always respected. Portfolio positioning would shift to either hedged or reduced long exposure. As always, an out-of-cycle update will be issued in that event.
For now, we sit right where we want to be—testing the short-term moving average in a market with the potential to continue higher.
Programming Note: Reader Updates
A quick reminder: Lines After Dark—the midweek market update—remains free through May. Starting in June, it will move behind the paywall for supporting subscribers.
Also beginning in June, the subscription price will increase from $22 to $28/month. Current subscribers will keep their existing rate. If you've been considering upgrading, now’s a good time to lock in the lower price.