The Market Just Endured a 'Double Correction'
Editor's note: Don't let this market shift scare you out of potential gains...
After a strong first-half performance in 2023, stocks have struggled in recent months. And many investors are reluctant to put their money to work right now.
But according to Vic Lederman, the editorial director for our corporate affiliate Chaikin Analytics, history shows this downtrend could soon result in plenty of buying opportunities.
Today's Masters Series is originally from the November 1 issue of the Chaikin PowerFeed daily e-letter. In it, Vic discusses the market's recent "double correction"... details how this could benefit investors in the long term... and talks about what investors can do today...
The Market Just Endured a 'Double Correction'
After a few rough months, the stock market recently crossed an important threshold...
Both the S&P 500 Index and the Nasdaq 100 Index fell into "correction" territory.
In other words, the market experienced a "double correction."
A double correction means the S&P 500 and the Nasdaq 100 both fell at least 10% from their most recent highs at the same time. It's a serious market condition...
You see, a correction often serves as a major psychological break point for the market.
Fortunately, history is on our side. And the results might surprise you...
Since 1974, the S&P 500 has moved up an average of roughly 8% in the month after it enters correction territory. And it has gained an average of 24% over the following year.
Put simply... the market's next move will be big.
So today, let's look closer at the current state of the market...
First, corrections like the one we just endured are more common than most folks realize.
From 2002 through 2021, the S&P 500 experienced a full-blown correction in 10 out of 20 years. That's half the time. Plus, a couple of other near-correction events occurred as well.
In other words, the S&P 500 experienced a major drawdown at least every other year.
I get it if you feel like we just dealt with a unique and trying time as investors. But the data shows that the market's recent double correction isn't as unusual as it might seem.
Now, let's turn our attention to what this setup looks like on the chart.
We'll start with the S&P 500. It fell about 10% from its most recent high in late July through its low in late October. Take a look...
I've also highlighted something else on the chart...
In short, the Power Gauge flipped to a "neutral+" rating for the S&P 500 on September 15. The system urged us to be careful with the index. And it did that long before the correction.
A similar situation occurred with the Nasdaq 100 at the same time. At Chaikin Analytics, we track this tech-heavy index through the Invesco QQQ Trust (QQQ). Take a look...
You can see that QQQ officially crossed into correction territory last month as well.
The Power Gauge signaled its first warning about QQQ on September 15. Then, after a short flip back to a "bullish" rating in early October, the system once again dropped to "neutral+."
But here's the thing... the markets are already bouncing back after the double correction.
The S&P 500 has rallied about 6% off its October bottom. And the Nasdaq 100 is up around 8% over the same span.
In the end, the situation we're facing as investors today is clear...
Stocks are still in a challenging position. The market recently endured a double correction. By that, I mean two important indexes fell at least 10% from their most recent highs.
Fortunately, history tells us that we don't need to fear this setup. We don't need to give up and sell everything. A V-shaped recovery is common after a market correction.
And so far, we're on the right path once again.
I'll keep watching these indexes closely to monitor where the market is headed next. You should do the same.
Good investing,
Vic Lederman
Editor's note: This setup could go in our favor, but it's not the only big move we can capitalize on moving forward. That's why Chaikin Analytics founder Marc Chaikin teamed up with Ten Stock Trader editor Greg Diamond to develop a system that could make you multiple times your money... without buying a single stock.
On Tuesday, they're unveiling this new strategy in an effort to help you prepare for a huge upcoming market shift. You can't afford to miss out on this urgent presentation. Learn more here...