Without question, we've endured a challenging stretch in the market recently...
The S&P 500 Index is down more than 2% over the past month. And the tech-heavy Nasdaq 100 Index has lost nearly 3% over the same period.
Beyond that, a major wave of volatility is sweeping across the top of the market...
In the Power Gauge, none of the so-called "Magnificent Seven" stocks earn a "bullish" or better overall rating today. And the group's collective performance has been terrible over the past month. On average, these stocks are down 8%.
This has shaken investor confidence. I'm sure you – or folks in your personal circle – are feeling the negativity in the market today.
And that leaves us with a pressing question... What's next?
Today, I'll explain the key support level I've been watching. And I'll discuss where history tells us the market is heading next...
Put simply, the broad market is struggling. And the Power Gauge makes that clear...
Based on the SPDR S&P 500 Fund (SPY), the S&P 500 has moved back into "neutral" territory in our system. And right now, SPY holds 121 "bearish" or worse stocks compared with just 67 "bullish" or better ones.
Meanwhile, when we look at SPY on the chart, it's obvious that the S&P 500 is trading between two key levels...
As you can see, I've marked two lines on the chart. The first is the red dashed line at $580. This traces SPY's recent low that we saw on January 10.
On February 10, I told paid Chaikin Analytics subscribers in an edition of Market Insights that "if we break 5,990 [in the S&P 500] on a closing basis, I expect knock-on selling pressure perhaps down to the 5,800 level."
Today, the S&P 500 is below that 5,990 level. And unfortunately, there is now a distinct possibility that SPY retraces to the $580 level in March.
If the S&P 500 breaks the January lows at 5,800, a full-blown correction of 10% to the 5,500 level is a possibility.
Earlier this month, corporate earnings pushed the market to new highs... but just barely.
Tech titan Nvidia's (NVDA) positive report on Wednesday night bolstered the AI growth story. Revenue for the company's 2025 fiscal year came in at more than $130 billion.
That's a 114% gain over the previous fiscal year. And it tells us that there is real wind behind the AI sails.
Unfortunately, the market is also facing considerable uncertainty. Concerns around political action have paralyzed many investors.
And the recent weak guidance from retail giant Walmart (WMT) has reignited fears around consumer strength.
That means that the market is stuck waiting for the beginning of the next quarter. And it's waiting for the general concerns around economic uncertainty to play out.
Until then, we're likely to see continued volatility.
Now, that doesn't mean I see this year as a wash...
If you look back up at the chart, you'll notice a green dashed line to mark the resistance level near SPY's prior high. That's about $610.
And regular readers will recall what I said on January 31...
2025 is shaping up to be a big year in stocks. And it all starts with the "5x Signal."
The 5x Signal is easy to understand. It triggers when the S&P 500 suffers a single "down" month followed by five straight "up" months.
As we saw in 2024, "record highs" can happen a lot during big bull runs. The 5x Signal doesn't occur as often. Over the past 70 years, it has only happened 30 times.
And as I continued, this signal points to even more gains ahead...
In the first 29 instances, the S&P 500 was up a year later 93% of the time. And even when you factor in the two "down" cases, the index had gained an average of 13% a year later.
As I mentioned, I brought all this up because the 5x Signal had triggered for the 30th time this past September. Based on history, the odds are in our favor for a big opportunity in 2025. And as I continued, there's more to the story...
Even better, the election is finally behind us...
When the 5x Signal flashes in an election year, most of the overall market's gains come later. They're essentially pushed into the post-election year – in this case, 2025...
History tells us, with 93% accuracy, that we'll see higher stock prices in the coming months.
Folks, we've seen a lot of uncertainty in this first quarter of 2025. But again, history tells us that there's still considerable upside potential ahead.
I'm still looking for the S&P 500 to approach 6,800 in 2025. Taking the recent pullback into account, that's roughly 16% above current levels.
So, be careful in the coming weeks. Stay disciplined and follow your stops. And don't chase positions down a hole.
This volatility will likely continue into March. But don't give up on looking for opportunities...
Big moves are still coming in this market. As investors, it's our job to make sure we're positioned for them.
Good investing,
Marc Chaikin
