Ep. 40 - 15 Extreme Charts for April 2025

The episode opens with a discussion on the significant volatility and uncertainty currently faced by the market, suggesting that this is a topic of widespread concern among investors. The hosts introduce a set of '15 extreme charts' produced by Lucas Downey at Mapsignals.com, aiming to provide clarity on recent drastic market movements. They note that the commentary hints at potential lasting impacts, pointing to the urgency investors feel to understand the market's trajectory.

Highlighting the first chart, the hosts reveal that the S&P 500 experienced a steep 19% drop from its peak, a decline that is historically within normal boundaries for corrections. However, they stress the importance of the speed of this correction, as the market underwent one of its fastest two-day drops at 10.5%. The discussion emphasizes that while such declines can rattle investor confidence, history shows that significant gains often follow substantial dips.

Further charts reveal the patterns that emerge after significant declines, especially a 5% drop. Historically, such downturns have been followed by average double-digit gains in the following six months. The hosts discuss notable drops from past crises to draw parallels with the current market dynamics, instilling hope for recovery amongst listeners.

The episode transitions to the analysis of money flows within the market, citing heavy outflows from equities that resemble panic levels experienced in 2020. The hosts suggest that significant selling pressure often creates conditions that lead to subsequent market rebounds, questioning the likelihood of overreactions among investors.

As the episode progresses, the hosts address market breadth, reporting that only around 12% of mid-cap stocks are above their 200-day moving average — a historically weak signal. They explore the implications of high volatility as measured by the VIX, suggesting that while it may feel alarming, historical data indicates that high volatility often precedes recovery.

Shifting focus to valuations, the hosts point out that many forward price-to-earnings ratios are now below long-term averages, potentially indicating buying opportunities for patient investors. They discuss the current market environment characterized by low demand and significant selling pressure.

Wrapping up, the hosts propose that we might be on the brink of extreme market changes, drawing lessons from past crises. They emphasize the importance of monitoring the Big Money Index, suggesting that a significant buying opportunity may present itself following extensive selling phases.