Overview of the Recent Correction

The S&P 500 index has recently entered a correction phase, declining over 10% from its record high reached just over a month ago. This downturn is primarily attributed to concerns surrounding the policies of the Trump administration, particularly in relation to tariffs, which may hinder economic growth and lead to a resurgence of inflation.

Understanding the Market Dynamics

This correction marks a significant moment, as it is the first occurrence since October 2023. Currently, the index is positioned about 10.1% below its latest closing peak, a critical threshold for investors looking for signs of market recovery.

Historically, the S&P 500 has shown resilience after entering correction territory. According to data from Dow Jones Market Data, since 2008, the S&P 500 has averaged a return of 15.3% one year post-correction. Meanwhile, it typically yields returns of 2.1% after three months and 4.9% after six months.

Wyckoff Markdown Phase Analysis

Following the all-time high established a few weeks ago, the S&P 500 has exhibited a rapid downturn, indicating a Wyckoff Markdown phase—a signal that often presages further declines:

• Subsequent to the peak, the index has dipped below the significant 200-day moving average.
• The relative strength index (RSI) has reached levels not seen since September 2022. While this indicates strong bearish momentum, it also suggests potential for bounce-back rallies due to oversold conditions.

Support Levels to Monitor

As the S&P 500 closed at approximately 5,521 following a 1.4% loss, investors should keep an eye on key support levels:

• 5,400: This level may offer support, aligning with a trendline from price movements recorded between June and September of the previous year.
• 5,265: A further decline could bring the index down to this level, where previous peaks and troughs from last year might present buying opportunities for investors.

Resistance Levels to Watch

In the event of a recovery, it is crucial to observe the following resistance levels:

• 5,770: This area could serve as a barrier to upward momentum, aligning with both historical price points and the 200-day moving average.
• 6,010: Should the S&P 500 surpass the 5,770 region, this level may present significant resistance, as it connects a trendline correlating various highs and lows from the preceding months.