The blue line in the top panel is the S&P 500 index price.
The gray bars in the second panel are the number of days prior to the start of a 5% correction.
The yellow bars in the third panel are the number of days prior to the start of a 10% correction.
The red bars in the fourth panel are the number of days prior to the start of a 20% correction.
The Takeaway: “Not every crack becomes a gorge; not every gorge becomes a chasm. However, every chasm starts from a crack.” - Willie Delwiche
It was only last week I wrote a daily number note that the S&P 500 had a 5% correction. Seven days later, the S&P 500 has now pulled back by 10.1%. The last time we experienced a 10% correction was in October 2023, which was 341 trading days ago. On average, we typically experience a 10% market correction approximately 1.1 times each year.
So that's it for the year? Maybe…
But there is always the possibility of moving to the next stage, which is a 20% decline, which is often referred to as a bear market. On average, bear markets occur only about 0.3 times per year, and we've already witnessed two bear markets over the past five years.
When I dug into the math a little deeper, I found that since 1950, there have been 25 instances of 10% market corrections that have not transitioned into a bear market. This means that only 30% of the time does a 10% correction lead to a bear market.
While there is a higher probability we won't enter a bear market, the market will ultimately do what it wants. I can only follow the data in front of me.
What are your thoughts on where this current correction might end? Do you think we could enter a bear market?
Grant Hawkridge | Chief Aussie Operator, All Star Charts
ICYMI: It’s been a brutal month for retail, but Jeff Macke’s been here before — and he knows exactly what to do next. Watch this video of Jeff and JC to hear his updated retail playbook and see how he’s positioning in this downturn.
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