The Market Correction Came, What's Next

Wait for full capitulation, buying the dip early can be painful

Recap

✅ Over the past few months, I’ve consistently warned about three converging risks: the return of Trump-era tariffs (where I kept reminding readers his trade war with China back in 2018 cause a market correction!), the difficulty of getting inflation sustainably back to the Fed’s 2.0% target, and the growing likelihood of a market correction in 2025.

I laid out these concerns across a series of posts:

• Jan 27 – The Return of Volatility

• Feb 2 – Volatility is Back. Tariffs.

• Feb 9 – When Macro Starts to Matter, Micro Stops to Matter

• Feb 16 – How Will DOGE Cuts Impact February’s Jobs Report?

Each piece flagged the early signs and briefly explained by thesis and concerns —volatility reappearing, softening growth, and inflation stickiness—that were setting the stage for a correction.

Then came the all-time high on Feb 19, with the S&P 500 hitting 6,147.43. Ironically, a few subscribers left, perhaps thinking I was early or just plain wrong. But markets tend to punish complacency. Just days later, equities began to roll over.

On March 2, I published The Upcoming Market Correction—and the very next day, the market finally cracked.

I was not able to post much because I had crazy wedding planning for my wedding on March 29—so I choose to let go of the noise and choose to be fully present. I’ve done the work and laid out the thesis so it was time to just relax and enjoy my wedding and honeymoon.

---

New 52-Week Highs vs New 52-Week Lows

• NYSE New 52-Week Highs: 19 vs New 52-Week Lows: 230

• Nasdaq New 52-Week Highs: 30 vs New 52-Week Lows: 204

• When you look at 52-Week New Highs vs 52-Week New Lows over the past weeks the data continues to not look promising.

New Highs - New Lows

The indices need to comfortably get back above the 0 level for a few days.

The New Highs - New Lows indicator (NH-NL) displays the daily difference between the number of stocks reaching new 52-week highs and the number of stocks reaching new 52-week lows. The NH-NL indicator generally reaches its extreme lows slightly before a major market bottom. As the market then turns up from the major bottom, the indicator jumps up rapidly. During this period, many new stocks are making new highs because it's easy to make a new high when prices have been depressed for a long time. The NH-NL indicator oscillates around zero. If the indicator is positive, the bulls are in control. If it is negative, the bears are in control. As the cycle matures, a divergence often occurs as fewer and fewer stocks are making new highs (the indicator falls), yet the market indices continue to reach new highs. This is a classic bearish divergence that indicates that the current upward trend is weak and may reverse.

McClellan Volume Summation Index

Is saying we are in a major trend reversal—we’re in a bear market now and this signal cannot be ignored. In bear markets, we tend to see vicious counter-trend rallies to the upside only to fall lower.

The McClellan Volume Summation Index (MVSI) is a breadth indicator which is calculated as a running total of the McClellan Volume Oscillator values. Its interpretation is similar to that of the McClellan Volume Oscillator except that it is more suited to major trend reversals. Think of the McClellan Volume Summation Index as the long-term version of the McClellan Volume Oscillator.

Percentage of Stocks Above the 200-day Moving Average

This is a long term indicator and we are making new lows—also not a good sign for 2025.

The Percentage of Stocks Above the 200-day Moving Average is a market breadth indicator that measures the percentage of stocks in an index trading above their 200-day moving average, a key long-term trend line. Traders use this indicator to assess the overall strength or weakness of the market. A high percentage of stocks (above 70%) are above their 200-day moving average, signals broad market strength, suggesting a bullish trend. Conversely, if the percentage is low (below 30%), it indicates market weakness and a bearish trend. Traders may also use the indicator to identify overbought or oversold conditions. A very high percentage (e.g., above 80%) may suggest the market is overbought and due for a pullback. In contrast, a very low percentage (e.g., below 20%) could indicate oversold conditions, hinting at a potential rally. Additionally, divergences between the indicator and the market index can signal weakening market internals, providing a warning of potential reversals. Overall, the % Above SMA(200) helps traders gauge market sentiment and time their entries and exits.

---

*This my personal blog and is not investment advice—I am not a financial advisor but a random person on the internet who does not have a license in finance or securities. This is my personal Substack which consists of opinions and/or general information. I may or may not have positions in any of the stocks mentioned. Don’t listen to anyone online without evaluating and understanding the risks involved and understand that you are responsible for making your own investment decisions.

---

Posts of Interest

JOLTS job openings should fall precipitously once April month data comes out—and the bear market moves will come roaring back.

---

Forecast

This tariff war is far from over—and the Trump administration has reintroduced a high degree of uncertainty and policy volatility into the markets. Markets can price in risk, but the market really struggles with chaos, and that’s exactly what this erratic trade policy is creating.

The indicators I follow can signal when market bottoms happen and I’ll try to keep readers informed week to week.