Since 1950, 46 of 56 earlier 4 percent drops in the S&P 500 hit a market already more than 10 percent below its record. The four that began within 3 percent of a record were all higher three months later, but gained half as much over a year.
Your split between drops near a record and drops deep in a selloff is the part I will keep. A 4.4 percent fall feels like a crash day, but when the index was only 1.7 percent below its record the day before, there was no discount to recover, so a modest rebound is the honest expectation. What struck me most is how narrow the damage was. The equal weight index fell 2.9 percent while the cap weighted index fell 4.4, and the chip ETF fell 12.2 percent. That tells me this was a crowded trade unwinding, not a market giving up on the economy. I am holding through it, as the base rate suggests, but I am not expecting the kind of rebound that follows a real selloff. My watchlist is the same as yours: Nvidia on 17 November, and whether breadth keeps holding up better than the headline index.
Agreed on breadth, with one caution from the case just outside our band. In April 2000, the index also fell from near its highs as a crowded theme unwound. It was up 11.3% three months later, but down 12.1% a year later. So a quick rebound wouldn't settle it. What decides the year is whether the theme's earnings hold, which is why 17 November matters more than the next few sessions.
Your split between drops near a record and drops deep in a selloff is the part I will keep. A 4.4 percent fall feels like a crash day, but when the index was only 1.7 percent below its record the day before, there was no discount to recover, so a modest rebound is the honest expectation. What struck me most is how narrow the damage was. The equal weight index fell 2.9 percent while the cap weighted index fell 4.4, and the chip ETF fell 12.2 percent. That tells me this was a crowded trade unwinding, not a market giving up on the economy. I am holding through it, as the base rate suggests, but I am not expecting the kind of rebound that follows a real selloff. My watchlist is the same as yours: Nvidia on 17 November, and whether breadth keeps holding up better than the headline index.
Agreed on breadth, with one caution from the case just outside our band. In April 2000, the index also fell from near its highs as a crowded theme unwound. It was up 11.3% three months later, but down 12.1% a year later. So a quick rebound wouldn't settle it. What decides the year is whether the theme's earnings hold, which is why 17 November matters more than the next few sessions.