• 144 days Could Crypto Overtake Traditional Investment?
  • 148 days Americans Still Quitting Jobs At Record Pace
  • 150 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 154 days Is The Dollar Too Strong?
  • 154 days Big Tech Disappoints Investors on Earnings Calls
  • 155 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 156 days China Is Quietly Trying To Distance Itself From Russia
  • 157 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 161 days Crypto Investors Won Big In 2021
  • 161 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 162 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 164 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 164 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 168 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 169 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 169 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 171 days Are NFTs About To Take Over Gaming?
  • 171 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 175 days What’s Causing Inflation In The United States?
  • 176 days Intel Joins Russian Exodus as Chip Shortage Digs In
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  1. Home
  2. Markets
  3. Other

Current Correction Should Be Tamer Than Spring/Summer Plunge

We have some elements in place for corrective activity, including fundamental concerns in Europe and high levels of investor optimism. The spring 2010 correction was painful with the S&P 500 falling 16%. If history is any guide, the current correction will most likely fall into the 3% to 5% range, rather than the 8% to 16% range. All corrections are unsettling, but the current situation should not be as gut-wrenching as what transpired between the April 2010 highs and the July 2010 lows. Investors who were patient and rode out corrections in 2009 were rewarded.

S&P 500 - 2009 Corrections

Updated look at current support for the S&P 500 is shown below.

S&P 500 - Support

We have tailwinds coming from Fed policy (see videos & analysis). We also have a market that is in better shape to date relative to where it stood prior to the spring and summer correction. Prior to the spring/summer decline, the weekly chart of the S&P 500 showed significant bearish divergences between MACD and price (left side of chart below). Today's market has a much better looking weekly MACD relative to price (right side of chart below).

S&P 500 - Better Shape Than In Spring

Three to five percent pullbacks are to be expected during any market advance. A 3% drop from the recent closing highs would take us to 1,189 – this has already occurred with the close of 1,178 on November 16th. A 5% pullback would take us to roughly 1,165 on the S&P 500, which is near an area of possible support. A move back to the next logical area of 1,156 would result in a 5.7% correction from the recent highs. A move to 1,144 would be a 6.8% correction. A break below 1,132, especially on a weekly closing basis, would be concerning and would make us much more risk averse (see table for key areas of possible support).

In terms of seasonals, we have entered a favorable period which may provide tailwinds for stocks over the next six to seven months. Obviously, the situation in Europe needs to be monitored closely.


Back to homepage

Leave a comment

Leave a comment