Bears showed up after the FOMC announcement, and the market got sold aggressively with every sector finishing lower on the day.
The S&P 500 plunged 2.95%, its worst drop in over two years. Small-caps, banks, and industrials have now given back all of their post-election gains, joining a growing list of groups to do this.
And the VIX spiked sharply, recording its second-largest single-day move in history.
On days like today, analysts are checking under the hood and assessing market internals to see how significant the damage is.
Here’s one of my go-to charts for this. It shows the percentage of S&P 500 stocks at 1-, 3-, 6-, and 12-month lows:
New lows are expanding over shorter timeframes, hinting at growing weakness under the surface. Today marked the highest reading in the percent of 1-month lows since March 2023.
However, longer timeframes remain largely unaffected—for now.
When fewer stocks drive rallies and more begin breaking down, it often signals the bull market is losing steam.
The bulls must act quickly to regain control. One down day doesn’t make a trend, but a string of bad ones can certainly cause damage to the existing trend.
We’ve seen bulls step in and repair damage like today’s time and time again this cycle. They're now on notice.
Do we bounce right back, like we did following the August swoon?
Or is this the beginning of something more?
I plan to monitor these indicators closely in the coming days and weeks. I’ll be looking to see if today’s spike in new short-term lows expands to longer timeframes.
Despite trends showing signs of damage, there's no need to panic. Corrective waves are a natural part of any bull cycle. So are really bad days.
The question I'm asking myself is whether this is just another dip we should buy…?
Or is it the start of something more meaningful - and further downside is coming?
I plan to let the data decide.
Yesterday, I wrote about what would have to happen to warrant a less aggressive or even bearish outlook. Click here to read it.
I encourage you to attend Sean’s live options event tomorrow at 2 PM ET.
He will be revealing the market scenarios he's preparing for Q1 2025 and the options strategies he plans to use to navigate them.
Sean is one of the best in the business at adapting to different market environments.
I have learned a lot from him in my years of working alongside him.
