All three major US stock indexes showed bearish momentum indicators during March by falling to new 4-month lows.
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The three indexes all saw a “correction" of at least 10%, with the Nasdaq moving in on bearish territory of a 20% retracement.
Active Investor: FREE newsletter going behind the headlines on the hottest stocks to uncover new trade ideas The constant threat of expanding tariffs and trade wars aren't the only bearish factors, but certainly pay a role by changing the underlying fundamentals of the US equities sector.
Heading into this past weekend, according to research from Barchart, the S&P 500 was poised for its “worst March performance since COVID”. There is a common thread tying March 2020 and this past month together, a disease that has nothing to do with a virus but is a global pandemic nonetheless. As March 2025 ended this past Monday all three major US indexes, and many overseas markets, were indicating moves to long-term downtrends on their respective monthly charts.
From a technical point of view, last month’s activity was significant. As I talked about in early March, the S&P 500 took out its previous 4-month low of 5,696.51 (November 2024). Recall I use the classic Four-Week Rule[i] as a momentum indicator for secondary (intermediate-term) trends when trading and a similar Four-Month Rule for long-term investment positions. As discussed in my earlier piece, what made this new 4-month low more prolific was it came on the heels of a bearish spike reversal pattern completed during February 2025. If technical analysis still has value, that is. What does all this mean? At the end of March, the sector looked long-term bearish, from a technical point of view.
Let’s take a look at the major US stock indexes:
The S&P 500 ($INX) confirmed the major (long-term) downtrend indicated at last February’s settlement. After completing a bearish spike reversal during February, the Index fell below its previous 4-month low of 5,696.61 during March before closing at 5.611.85, down 342.65 for the month. The Index lost 9% of its all-time highest value, 6,147.43 in February, with a classic definition of a “correction” being a 10% break, before turning bearish at the 20% level. For the record, the 20% mark is down at 4,917.94. It’s possible long-term investors may have followed Warren Buffett’s lead and moved to cash given all the uncertainty in the S&P and last month’s move to a new 4-month low and settling the month below that mark.
The Dow Jones Industrial Average ($DOWI) completed a bearish spike reversal during December before consolidating during January and February. The DJIA then confirmed a new major downtrend with a move to a new 4-month low during March. Last month’s low of 40,661.75 was down 10% from the all-time high of 45,073.63 registered last December as part of the bearish spike reversal mentioned above. This again invokes the dreaded term “correction”, with the bearish 20% level down at 36,058.90. As with the S&P 500, long-term investors likely moved to reduce risk in their holdings or simply rolled out to a different market sector. Precious metals come to mind as a safe-haven sector when others are trying to set the world ablaze.
The Nasdaq ($NASX) also confirmed a new major downtrend during March as it took out its previous 4-month low of 18,112.83 (November 2024). The Nasdaq fell to a low of 16,857.10 last month, down 17% from its all-time high of 20,304,58 posted back in December. This means the break in high-tech stocks was already approaching the bearish 20% level of 16,163.66. The Index recovered slightly through the end of the month, settling March at 17,299.29, still down 14% from its December high.
Fundamentally, what might fuel the technical move to long-term downtrends? I saw a post calling out all those laying the blame for the bearish turn at the feet of the US president, he of the never-ending back and forth of tariffs; threatened, imposed, delayed, etc., and ongoing trade wars both old and new. Is this the driving force behind a possible bearish turn? It is certainly a piece of the puzzle. It doesn’t take much intelligence to realize tariffs and trade wars spark inflation (you can see this as recently as 2018), forcing the hand of central banks (including the US Federal Reserve) to raise interest rates to fight the growing flames of higher prices. If/when interest rates start to go back up, investors will take note, theoretically pulling money out of equities and putting it into treasuries (or cash, depending on your view of the US government in general).
Where this gets more interesting is when we pull the long-term monthly charts for US Treasuries into the picture. I’ll talk about these tomorrow.
Stay tuned.
[i] From John J. Murphy’s “Technical Analysis of the Futures Markets” (1986 ed.), pg. 268-274
