S&P 500: Relief Rally Time
A Market Slingshot
Risk Happens Fast— 5th Fastest Sell Off
Last week’s market continued its sharp decline, marking the fifth fastest sell-off in the past 75 years, according to Fundstrat’s Tom Lee. He also noted that 6 out of 6 times, the market was higher three, six, and twelve months later following similar sell-offs.
In the March opening letter, I emphasized that in today’s hyper-connected, social media-driven market, risk happens fast—and this sell-off is a prime example. A lot can happen between now and the next three months.
As you’ll see throughout this letter, I expect a bounce or relief rally from current levels. However, I’m personally not ready to buy the dip for the longer term until the risk-off criteria subside and remain absent. Until then I am happy to trade the bounce.
Last week’s performance of the four key market barometers:
S&P 500 -2.27%
Nasdaq -2.46%
Russell 2000 -1.49%
Cathie Wood’s ARKK -6.22%
Risk Management Pays Off
At this stage, the first risk-off alarm of 2025 deserves a gold medal—triggered on February 21, it has so far preceded an -8.4% decline in the S&P 500 and an -11.4% decline in the Nasdaq.
Risk management is the core value proposition of this weekly analysis and my own portfolio strategy. The goal is simple: protect capital in advance of the worst market days.
So far, this decline has lasted 14 trading days, with a maximum drawdown of -8.46%—compared to the 13 prior risk-off signals over the past three and a half years, which produced an average decline of 7.7% over 21 trading days.
I Want to Hear From You
Did the February 21 risk-off alarm help you navigate this decline? Let me know in the poll below.
This week’s letter will:
Review the current risk-off criteria
Share short-term (1–2 week) thoughts on a potential relief rally
Outline key levels and indicators to determine whether the current corrective low marks the end of the decline—or if a deeper drop is still ahead
Risk Off Criteria - 3/3
Three risk criteria determine the broader market environment in my analysis. This section is shared and updated weekly. When all three criteria are simultaneously triggered— this sets off the “alarm”