Caution: S&P 500 Indicator Suggests an Upcoming Market Correction

Summary

• A rare S&P 500 signal suggests a potential 15% market correction ahead.
• Despite recent declines, strong tech performance and bullish indicators offer some optimism.
• Analysts urge caution as trade disputes and economic concerns weigh on 2025 forecasts.

During the course of April, the S&P 500 both crashed more than 10% and closed within 2% of the prior month’s close. This has only happened five times within the past 98 years. In each instance, a market correction followed.

On average, the benchmark index slid by 15.3% over the course of the next 365 days, according to noted pseudonymous technical analyst Subu Trade, who highlighted past price action in an April 30 X post.

The S&P 500 fell more than -10% during this month, but is on track to close within -2% below last month’s Close.

What a reversal.

The last time this happened was during the Great Depression.

— Subu Trade (@SubuTrade) April 30, 2025

At press time, the S&P 500 stood at 5,650 points, having marked a 0.64% decline on Monday, May 6, and snapped a nine-day winning streak. On a year-to-date (YTD) basis, the index is down 3.93%.

As interesting as this occurrence is, readers should still keep a couple of factors in mind. Firstly, no indicator or signal offers a 100% guarantee. For one, the last time this signal appeared was 1938 — suffice to say, the global economy and the stock market have undergone significant changes since then.

That nine-day winning streak that has now ended is the S&P 500’s longest string of consecutive green days in the past 20 years — so there’s obviously a significant degree of buying interest present.

While macroeconomic and trade concerns, like the recent drop in GDP and the White House’s idea to impose tariffs on movies, continue to rattle markets, recent outperformance by tech sector leaders has gone a long way in restoring investor confidence.

In addition, there’s no shortage of bullish technical signals either. The Zweig Market Breadth Thrust, an indicator that generally marks the start of bull rallies, also flashed recently.

With that being said, trade disputes will continue to dominate the narrative going forward — and Wall Street has made significant cuts to its S&P 500 targets for 2025 so there are multiple factors to take into consideration.

Featured image via Shutterstock