S&P 500 a threat to reverse 2025 gains. Are you ready for it?
A Taylor Swift hit song might as well be a risk manager's theme song right now. What I'm doing about the gathering technical evidence that this could be a big one.
Let’s say the quiet part out loud: the stock market is grossly overvalued. So why is the S&P 500 still 3% from its all-time high? Because risk of major loss, my top focus as an investment analyst, is not a certainty, it’s a probability. Like your team winning a game, the price of gasoline at the pump a month from now, or having a health issue.
And that’s what so many investors miss, and should get in sync with. Before they find out that markets travel in all directions, not only north.
To size up where we are, and potentially where we are going at any moment in time, I created the ROAR Score. It is not a guarantee. It is more like those new, hot, sexy prediction markets, like Kalshi or Polymarket.
Or like my favorite sport, horse racing. The favorite does not win every race. Actually more like 1/3 of races. And not all favorites have the same odds. And long shots come in, with some sharp racing analysts developing a nice habit of finding them. Investing is analogous to horse racing in many ways. That’s one reason I created my other (free) Substack site, HorseClaiming.com
As for the S&P 500, and the other major stock indexes, they are getting smoked as this week closes. The impulse reaction from many newer investors (those who have not had significant assets at stake during a bear market) is to ask “should I buy the dip with both fists today, or wait until next week?” In other words, they’ve been trained by market pundits that every drop in stock prices is a “buying opportunity.”
That’s not true. But try telling some of them. I have tried.
What’s the market telling us right now?
Below, as I’ll show in living color, the major stock indexes are presenting what to me is one of the more threatening pictures I’ve seen in a while. The ROAR Scores are reflecting it for the most part. However, I think it is the rest of this month of March that will be the proving ground, one way or the other.
Why do I think that? Because I’ve spent 30-something years looking at charts, and recently developing an automated way to read them. And when I see pictures that look like this, I know I’ve seen them before. Many times, since the 1980s.
Some of them led to huge drawdowns, reversing years of gains in a fraction of the time. And others were just false alarms.
But my mantra as an investor, back in my days as a fiduciary client advisor, and today as a semi-retired investment writer and “Chief ROAR Score Evangelist” has always been the same. And my portfolios’ paths during uncertain times like this support it: if you manage risk tightly at all times, you get your fair share of the ups. But more importantly, you will also do what one some describe as “minimize maximum regret.”
We are in one of those market eras in which wide swings in value should be expected. The question, as Taylor Swift would ask, is this: are you ready for it?
ROAR.PiTrade.com is our free “lab” you can try out.
ETFYourself.com (paid levels) is where I explain what I see there, and in my direct chart work too.
PiTrade.com is where those who simply want to copy what I do in some of my risk-managed portfolios can do so.