S&P 500: Two Paths
Rally to rejection or new highs
Risk Happens Fast
Last week was a strong validation of the risk management strategy shared in this newsletter. Two weeks ago, on February 21, the system triggered its first risk-off alarm of 2025—and since then, the S&P 500 has declined as much as -5.7%, while the Nasdaq has dropped -8.7%.
The past week saw a sharp sell-off across all four key market barometers:
S&P 500 -3.10%
Nasdaq -3.27%
Russell 2000 -4.05%
Cathie Wood’s ARKK -5.73%
Performance vs. Previous Risk-Off Alarms
The current decline has now extended to 10 trading days, with a maximum drawdown of -5.7%. For context, over the past three and a half years, the risk-off criteria have triggered 13 times, with an average decline of 7.7% over a 22-day period.
In the short term, two viable paths are emerging—this week’s letter will break down both scenarios and what to watch for next.
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”