To The Moon

S&P 500 has officially entered correction territory coming down 10% off its recent highs. We also saw the QQQ are now down about 14% from their recent highs, this is despite we have a very decent piece of data, we have more than favorable producer numbers here in terms of inflation month over month came in at zero compared to 0.3%.

This was a lot better than expected, on the year-over-year, PPI came in at 3.2 compared to 3.3 (estimate). In terms of core, we are actually deflationary month over month which is 0.1% to the downside, instead of the 3% expected and 3.4 on the core on year-over-year.

The initial jobless claims were less than the anticipated amount, this prove to be not enough, yesterday’s CPI was also not enough to bring up the markets. The market went down after tariff news before recovering in the afternoon. A favorable jolts jobs opening report in Tuesday session which showed there are more jobs in the economy available was not enough to calm the market fears in terms of the tariffs.

I believe there should be a lot of uncertainty for at least next 30 days in terms of the economic policies and tariffs, and the corrections would be another impact.

PPI Data Positive Yet Market Down Due To Tariffs Impact Scare

We saw favorable producer inflation numbers compounding off the better than expected inflation report which came on Wednesday. Despite these positive data points, market is still going down.

We need to understand that the market is a forward-looking mechanism and right now market is focused on the tariffs by the Trump administration, and what is going to happen on 02 April when the Trump Administration announced the reciprocal tariffs against rest of the world essentially would be an important things for investors to watch.

SPY Down And No Significant Rotation Seen

$SPDR S&P 500 ETF Trust(SPY)$ was down about 1.33% and officially entering into the correction territory just over 10% from the earlier part of February. The $Invesco QQQ(QQQ)$ was also down by 1.8% with continued big tech selling off and it is down almost 13.5% from its highs and across the board.

Indexes were also down largely and no sector rotation seen clearly but we are seeing rotation into safe haven assets like gold and bonds. $SPDR Gold Shares(GLD)$

10 S&P 500 Sectors Down Only Utilities Managed A 0.27%

$Apple(AAPL)$ was leading the downside 3.36%, dragging the consumer electronics down by 3.27%. Actually there is no big tech names that were doing well, $NVIDIA(NVDA)$ was green for most of the trading session but start to taper off towards the end of the afternoon session.

The financials was also down by 0.55% except for $Berkshire Hathaway(BRK.B)$ which was up 1.68%. Healthcare was also down by 0.51%, the value rotation that was expected did not happen.

Only materials and utilities managed to get a small loss of 0.14% and gain of 0.27% respectively. The biggest laggers was led by communication Services which was largely responsible by Meta and Google to the downside losing 2.67%.

On the weekly, though we saw Utilities and Energy in the green, but the rest of the sectors are on the downside. The monthly relative performance was on the decline with healthcare being the least loser, the biggest laggers are technology and the consumer cyclical, because of the technology names performance lately and the consumer cyclical was due to the impact that tariffs going to cause consumer directly with the odds of a recession ticking up slightly as well.

Where Do We Stand In Terms Of This Correction?

After the EU announced a 50% tariffs on american alcohol namely whiskey, President Trump reacted with threatening a 200% tariff on alcohol and wine from the EU countries that led us to the downside into correction territory.

The markets were not able to recover at any point during the day as we saw a lot of pressure selling to the downside. The QQQ remain in the oversold territory on both indexes, and we are not at a local bottom yet.

So we need to ask ourselves this question where do we stand when S&P 500 officially closes into correction territory? I think we need to see what the past correction of S&P 500 show us.

Since 2008, we can see that stocks have typically declined in the first month after the S&P 500 entered correction territory, with the index delivering an average negative return of 1.7% after 30 days.

However, we are having a mixed performance for after one week, there was an average of 1.6 % to the upside after we could be seeing a relief rally after 1 month. If we go for a longer timeframe (like 3 or 6 months), stocks tend to rebound with with the S&P 500 gaining an average 2.1% over the following three months and nearly 5% over six months, according to Dow Jones Market Data (see chart below).

There are some years such as 2008 the actual outliers that are a lot worse but we need to understand that in 2008 we had a lot of different factors than we had right now, there was the entire Financial collapse as the banks were heavily overleveraged in arguably very speculative.

Now the securities and debt obligations was collateralized right as we have seen from the bank earnings about one month ago, the banks are well capitalized and not even close to being over-leveraged.

In terms of 2025, we are seeing GDP moving at a 2% forward rate, the jobs market is still growing in terms of jobs available. The unemployment rate is at historical lows 4.1% right now. As we have seen in two different reports that the inflation is trending now to the downside.

So the economy right now is not crashing if we were to look at the stock market alone, the data still shows that it is pretty good. But can the data potentially turned worse in the next 3 to 6 months, I would say potentially possible, but we need to understand that we are still far away from what happened in 2008.

Closer To 2022 Bear Market Far From 2008

If we were to look at in terms of volatility and speed of the move to the downside at this point it does have some similarity to 2022 bear market. But we need to remember that 2022 was a much different market as we were dealing with 7-8% or almost 9% inflation to the upside.

The Federal Reserve was embarking on the fastest rate hiking cycle ever in the last 30 years, this time we are dealing with fear of uncertainty for the future. Not knowing how long the tariffs will be kept in place or how much the final amount of the tariffs will be implemented.

Since the market is a forward-looking mechanism, it is trying to price in the highest end of worse case scenario now. But that is the closest that we could probably get now as the speed of decline is definitely reminiscent of 2022.

If we looked at the 3 months, we are a bit negative during 2022 after the corrections, but overall, the average still looks positive for the three and six months, even one year also show the same.

So it is very difficult for us to tell whether we are at the actual bottom. What I think we can do is if we have a long-term portfolio mindset, we can keep doing dollar cost averaging into high quality companies which have been around for 10-20 years and have proven to be resilient and have sound business models. These companies have been making through these types of corrections.

CNN Fear And Greed Index - Extreme Fear Currently

Currently, we are seeing the market still at extreme fear by looking at the CNN Fear and Greed index. The current reading of 15 indicate extreme fear because there is a lack of overall breath in the market.

There are a lot of stocks hitting new 52 week lows by the day. The stock market breadth is not too hot, it is currently still at extreme fear, this is one of the lowest reads that we have in the last 12 months of data.

Percent Of Stocks Above 20-Day MA Down To Lowest - 16.94%

The percentage of stocks above their 20-day moving average now down to a low point of 16.94% historically this has always been fantastic opportunities to buy the dip you can go back on this chart all the way to 2002.

This low zone present a great time to be adding to your long long-term portfolios, but some of us might be feeling that we are basically throwing money into the fire, and I understand that there is completely normal. But a lot of people have been hoping to buy the dips throughout last year, complaining that the market is overvalued and they wanted a correction to get a more manageable valuations.

But do not put all your monies into it, do it progressively as these stocks will fall through these levels over the next 30-90 days, we will get more shares which would stay with us over the next 5-15 years because these companies that we invested in will continue to do exactly what they have been doing in expanding revenue, EPS and free cash flows over the next 5-20 years.

This is why we need to focus focusing on companies that have high competitive advantages, with a large MOAT which means that they have low competition and high barriers of entry. Basically these are characteristics of a high quality company.

Percent Of Stocks Above 50-Day MA Down To Lowest - 22%

A low percentile of 22% of stocks only above their 50-day historically, so same thing, this present us a good time to start buying the dip.

Percent Of Stocks Above 200-Day MA Down To Lowest - 32.5%

We can go all the way back to 2002 to find that proof and percentage of stocks above their 200 day moving average the longer true moving average is at a 32.5.

If you go back in the historical context, this bar down to just encompass the general area of where we are in, the question of will it go lower, there is still a possibility but I see that this could be a good starting point to start to buy these companies.

However no one can really tell how long this correction would last, but if you have been following the volatility, I would probably think that it will going to last through at least the first two weeks of April, because it is very simple, the market is not even pushing to the upside after good economic data releases right now.

The market is focused only on one thing which is more clarity on the tariffs in terms of the duration, the negotiation tactics and how long they will be.

Watch Final Outcomes Coming From Tariffs

The final outcomes coming from the tariffs would be if we are looking for a true market bottom, then I am estimating that potentially we are looking at end of either April or May.

We also need to look at the economic damage that could be resulting from these policies, it might be felt later and a little longer than expected, maybe over the next 3 to 6 months.

March is going to be negative, probably April would start negative, and if we get some relief rallies after some tensions. Another hard data which could see Fed pivoting if the data support its decision, then Fed might start cutting rate more rapidly.

After two massive period of declines which is very similar to 2022 or something like what we saw in 2018, where we saw 2 period down on the monthly time frame, we are hoping to see a recovery and then there might be a rapid rally as well.

Summary

So from what I have gathered and examining the past historical data, it looks like this S&P 500 correction might last longer, so this might be a good time to start dollar cost averaging if you hold some good quality stocks which have fallen below the key level like 20-day and 50-day MA.

If not, it would be a good time to look at stocks that are still holding up above the 20-day and 50-day period but remember to pick only good quality stocks.

I will try to share in another article what are some of the quality stocks I am looking at.

Appreciate if you could share your thoughts in the comment section whether you think S&P 500 correction would continue into April unless a tariffs reversal help it to exit the correction.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.