MarketSurge powers the charts in this video.
The selling has accelerated. SPY is now below its volume-weighted average price since its April 2025 lows during the tariff war correction. We are in the midst of a different war now with even more serious consequences for the entire world – a potential energy crisis and stagflation. The next potential support for SPY is around 610.
It is rare to see the market panic and sell everything. Those periods typically don’t last long and are a precursor to bottoming. The major stock indexes around the world are already down 10-20% from their recent highs. Last week, we finally saw some elements of panic selling as even the last remaining momentum leaders started to crack. This is actually positive for the future prospects of the market. The sooner a potential crisis is priced in, the sooner the market will be able to see through the chaos and quickly determine the potential winners. Look at the price action in ZM, for example, during the Covid selloff in 2020. Back then, SPY went down 35% in less than two months. During that time, ZM made a new all-time high and gained 5x in the following seven months. There will always be winners and losers, and the market does a good job highlighting them.
Take, for example, the current crisis. The energy sector is having one of the best years in its history so far. So many, otherwise slowly moving and boring, oil and gas stocks have been making new all-time highs on a weekly basis. Many of the chemical-related stocks are also pushing to new highs as they benefit from shortages – MEOH, CF, DOW, CC, etc. The solar stock SEDG is also gaining notable relative strength – the longer this energy crisis lasts, the more people and countries invest in solar and nuclear. Obviously, when the market smells a potential end to this war, many of these stocks are going to take a serious haircut.
It is good to keep in mind that regulators have the same playbook for every serious crisis – they throw a lot of liquidity into the system. When that happens again, gold, crypto, and many stocks are likely to have their time of day again. Until then, it is important to protect capital, confidence, and stay in good trading shape.
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