Major Declines In the US Stock Market

Hope you're well and feeling prepared for this current decline. I'm sharing some thoughts today through the objective lens of technical analysis.

There’s historical precedent for politics influencing markets…it’s a studied thing way above my pay grade (see quote/book above). But I am here to share what I’m observing that might offer some context for the present.

I reviewed the significant declines, how deep they were, how long they lasted, and what administration was presiding at that time, and I annotated the monthly charts below.

I don’t have much commentary here, just a few notes to highlight how quickly and decisively some of these past moves unfolded. We're currently down 17.53%, and I want to place that in the context of history to help guide potential scenarios. My two key takeaways are:

1. Perspective. Remembering we’ve been through similar drops before. This can help ease the fear and anxiety that may arise because of uncertainty. Reviewing historical declines can offer clarity in all the madness.

2. Pattern recognition. While I always ground my outlook in technicals, I don’t rule out the possibility of market manipulation tied to political agendas. Of the 5 major declines I marked in the monthly charts above, the two that stand out due to their sharpness and speed are:

   • The decline toward the end of Bush's second term (57.69% in less than 2 years) and

   • The decline during Trump's first term (35.41% in two months).

   The current decline may just be a repeat of one of those playbooks.

Market Outlook

I'm starting with the monthly chart to ground this in the bigger picture. This is where I added my trendlines. These anchors come from pivot lows that have helped define the structure of this market over the last 15+ years.

• March 2009 (Yellow Line): the post-Housing Bubble low, and the oversupply of subprime mortgages

• March 2020 (Aqua Line): the COVID crash low, triggered by pandemic announcements, shutdown, and subsequent reactions

• October 2022 (White Line): the bottom of the most recent bear market before the 2023 recovery

Before reviewing the weekly chart, I want to clarify that right now, headlines, tariffs, and uncertainty are fueling the decline. When there’s this much emotional and political turmoil, technical levels can (and will) break. A price level doesn’t stop fear, it might pause it, but it won’t override it.

🔴 Bearish Scenario
Price may slice right through the uptrend line from October 2022. We could see a brief pause at 4956, a previous level of support, though I’m more focused on the area around 4816, where we have a convergence of the March 2020 uptrend line and a horizontal level that marked a major pivot back in 2021. The rising 200MA, around 4700, is not too far from that point either, and could also stall the decline.

Just FYI, the percent from the peak to each line:

March 2009 (Yellow Line): about 42%

March 2020 (Aqua Line): about 21%

October 2022 (White Line/where we are at now): 17.5%

🟢 ⚪️ Bullish-ish Scenario (this will be a combo of neutral and bullish)
Right now we’ve closed on the uptrend line from October 2022. This level could offer temporary support, whether that’s a bounce or just a pause. It can be a spot where buyers are attempting to step in, especially those looking to buy the dip.

If dip buyers do step in, I could see a move to 5261 and possibly 5414, but I think I’m being generous. I expect either way it will be a retest followed by continued decline, or some sideways movement.

And just to remind you: Every strong run, in either direction, is followed by a period of digestion. Trying to buy the bottom is typically a bad strategy because…even if you manage to buy near the bottom, it will likely be followed by weeks or months of chop before a clear uptrend forms. That’s just how bottoms work...they don’t announce themselves, they settle in slowly. IMO, smart investors don’t try to catch the bottom, they wait for confirmation.

CVNA: Stock Spotlight of the Month

Friday’s candle left a lower wick, which shows buyers stepped in intraday…likely dip buyers trying to catch the bottom. That kind of reaction isn’t uncommon after a fast drop.

🟢 ⚪️ Bullish-ish Scenario
If we do get a bounce, I could see it retesting 176/178 which aligns with the 50SMA on the weekly chart, and sits close to a broken trendline retest zone. This area makes sense as a place where sellers could re-enter as a pullback strategy. 192 is also a level where it could retest the daily 200SMA. Anything past that is highly unlikely IMO.

But a note about this scenario…Whether we get a chop, bounce, or maybe some sideways action, I still lean bearish overall.

A few things that reinforce this:

• Price is interacting with multiple broken trendlines, and that usually doesn’t resolve quickly.

• On both timeframes, the 10 and 20 EMAs are now above price and rolling over, which increases the likelihood that any bounce gets sold into, not built on.

🔴 Bearish Scenario
My bearish scenario puts this heading toward 125, a level that stands out as major structural support and aligns with the weekly 200SMA. That may be a more meaningful zone for buyers. Further down my target would be around 98 where the May 2023 uptrend line and a horizontal level converge.

Whether you’re investing or trading, patience matters. You don’t want to be caught with new stock positions in a deeper decline, or stuck in a chop that wears you down emotionally.

As a trader, I’m sitting out of any bounces for now. We’re still in a downtrend, and until things settle, I don’t expect any sustained moves to the upside. That doesn’t mean you can’t trade the smaller time frames (if that’s in your strategy). Just remember, we don’t have to catch every move.

Let the dust settle. Let the market show you it’s ready. Then make your move.