The S&P 500 dropped 2.7% on Friday, the first 2% down day in 119 trading sessions.
Here’s the chart:
Let's break down what the chart shows:
The top panel plots the S&P 500’s daily close in black.
The bottom panel shows the daily rate of change. Each bar represents the one-day percentage move.
Yellow bars mark days down more than 1%, orange shows moves worse than –2%, and red highlights drops greater than –3%.
The Takeaway: This is the first bearish note I have written in a while.
Friday’s 2.7% drop ended a long stretch of calm trading.
Year to date, the S&P 500 has had 23 down days of 1% or more. The long-term average since the 1950s is 25.
The latest hit brought a wave of bearish evidence all showing up together:
Risk-Off Index spiked to its highest level since early May.
Risk On / Risk Off Indicator fell back into the neutral zone.
Bloodbath Sidestepping Indicator triggered as NYSE new lows surged past 4%.
High-yield bonds vs Treasuries hit their weakest level since May.
Russell 2000 appears to have posted a failed breakout.
Breadth weakened sharply:
Only 27.3% of S&P 500 sectors are above their 50-day average.
Oversold stocks and 3-month lows both reached their highest levels since April.
One day of price action does not change a trend, but Friday’s session deserves attention.
What would be concerning is a cluster of large down days, not an isolated one. A single spike in daily volatility often reflects a quick emotional flush, especially when it follows a long stretch of calm.
Until we see sustained selling pressure or multiple –2% and –3% days stack up, the trend remains intact. For now, this looks more like a volatility visit than a regime change.
If the bears want to prove this move lower is something more than a one-day shakeout, they will need confirmation in the days ahead.
One day does not change the trend. It only reminds us to stay alert.
What bearish data points stood out to you after Friday’s close?
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