- Solve real problems with our hands-on interface
- Progress from basic puts and calls to advanced strategies
Interactive Options Course
Posted March 12, 2025 at 11:15 am
1/ March 2025 Reveals Echoes of January 2022
2/ Newer Dow Theory Flashes Confirmed Bearish Signal
3/ Breadth Conditions Continue to Deteriorate
Investopedia is partnering with CMT Association on this newsletter. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.
March 2025 Reveals Echoes of January 2022
Yesterday we compared the current pullback phase to the July 2024 correction, as we have now reached a similar threshold in terms of price and time. So what prevents us from declaring an obvious end to the current pullback phase? It’s because the first wave of a long-term downtrend often displays similar technical characteristics.
Charts can provide a fantastic history lesson to help us relate the current price action to previous market cycles. And a quick glance at the 2022 market top can yield a remarkable number of similarities to the S&P 500’s current trajectory. We’re now down about 10% from the February 2025 high, which is pretty much where the first drawdown ended in January 2022.
After making a low just above 4200 in late January, the S&P 500 rallied almost 9% higher before it stalled out around 4600. Note how this countertend rally stopped just below a downward-sloping 50-day moving average and then made a new low in the following weeks. So before we draw too many comparisons between the current market and July-August 2024, let’s remember that extended bear markets often have a very similar beginning!
Newer Dow Theory Flashes Confirmed Bearish Signal
One of the items on our Bull Market Top Checklist is a confirmed bearish signal from what we call the “Newer Dow Theory.” This chart represents an updated version of Charles Dow’s foundational work from the early 20th century, where he used the Dow Industrials and Dow Railroads to validate periods of economic growth.
In our updated version of Dow’s approach, we’re using the equal-weighted S&P 500 to represent the “old economy” and the equal-weighted Nasdaq 100 as a proxy for the “new economy.” We observed a “bearish non-confirmation” in mid-February, with the Nasdaq making a new high while the S&P 500 did not confirm this breakout.
This week, we’ve now seen both indexes break to a new low for 2025, indicating a confirmed bearish signal. With both indexes breaking below key support levels, further deterioration seems to be a likely scenario as we move toward the end of the 1st quarter. And while snapback, countertrend rallies should be expected, this confirmed bearish signal suggests that rallies could be short-lived.
Dick’s Sporting Goods Reflects Consumer Challenges
While the markets are bracing for inflation data in the form of CPI and PPI readings, the latest earnings release from Dick’s Sporting Goods Inc. (DKS) could provide a preview of what we’ll learn about the market’s expectation for consumer sentiment.
Basically, Dick’s exceeded analyst expectations for the quarter, but downgraded their outlook for 2025. As a result, investors sold DKS to push the price almost 6% lower on Tuesday. This comes after a failed attempt to break above key price resistance around $240 in January and February.
DKS had already dropped around $40 from its January high, bringing the price back to the middle of a consolidation pattern going all the way back to March 2024. This week’s drop also confirms a breakdown of the 200-day moving average, and keeps the price below trendline resistance. But the most troubling feature of this chart is that it represents lowered expectations for a popular retailer, weakening sentiment for consumers, and possibly a broader concern for the impact of inflationary pressures in the weeks and months to come.
—
Originally posted 12th March 2025
Investopedia.com: The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Investopedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Investopedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Related Articles
Join The Conversation
For specific platform feedback and suggestions, please submit it directly to our team using these instructions.
If you have an account-specific question or concern, please reach out to Client Services.
We encourage you to look through our FAQs before posting. Your question may already be covered!