MW This stock-market correction signal just triggered for only the third time in seven years. Here's the message for investors.
By Barbara Kollmeyer
Research firm Variant Perception says get ready for weeks of volatility and uncertainty
A signal of a possible stock-market correction has flashed.
Equity futures and oil have been swinging around on Thursday as investors remain in the thick of trying to navigate a worsening Iran conflict.
Our call of the day from independent investment research provider Variant Perception says its tactical correction signal for the S&P 500 SPX has activated for the first time in nearly two years, as it warns of prolonged volatility for investors.
The last such signals were triggered in April 2024, Nov. 2021 and August 2019, Variant told clients in a Wednesday note. Stocks fell in April 2024 as rising inflation weighed on hopes for rate cuts, while 2022 proved a weak year for the index and getting out of stocks in Aug. 2019 would have meant ultimately sidestepping a pandemic rout.
Variant was founded in 2009 by the now CIO of asset manger Prevatt Capital, Jonathan Tepper, under a belief that "robust, repeatable tools work better than gurus with crystal balls." One prescient call in 2023 from its "age of scarcity" predicted an era of cheap credit and commodities was ending and that so-called real assets and infrastructure would benefit. This year, the ETFs for energy XLE, industrials XLI and materials XLB sectors have all boomed in value.
Variant explained that its model was made to "flag broad-based deterioration in credit and volatility across asset classes" not yet reflected in the S&P 500.
"On a scale of 'nothing, something, everything,' the activation of our correction signals is 'something,'" said Variant. "We would interpret the correction signal activation as warning of a potential further short-term correction in the S&P 500 to test the 200-day moving average support,rather than anything more sinister for now."
The 200-day average is 6,579, versus Wednesday's close of 6,869.
They say returns for stocks tend to be negative on average after that signal is activated. However, those losses often coincide with neutral or risk-off macroeconomic setups, and not the current resilient macro backdrop headed into March and the Iran conflict that they noted.
They pointed to a couple of past similar correction signals against positive setups that did see 10%-plus multiweek pullbacks. One came in April 2010, following the end to the first round of quantitative easing to deal with the global financial crisis, with a flash crash for the S&P 500 that May. The other instance was June 2015, when China's stock market crashed.
"This suggests we would need a meaningful shift in the policy environment or further shocks to drive a more sustained downturn," said Variant.
While they reminded clients that markets will commonly see a 10%-plus drawdown in any given year, the optics around the current situation is troubling.
"Given the extreme uncertainty and headlines risks risk now and the correction signal activation, we would expect the current period of volatility and uncertainty to last weeks, not days," they said.
One possible stabilizing event: President Donald Trump's meeting with China's president Xi Jinping, provided the Iran conflict doesn't derail that.
Read: Citadel's Scott Rubner on why everyone is too bearish and stocks are headed higher
The markets
U.S. stock futures (ES00) (YM00) (NQ00) are slipping as oil (CL.1) (CL00) (BRN00) pushes higher. Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y are rising along with gold (GC00) and the dollar DXY.
Key asset performance Last 5d 1m YTD 1y S&P 500 6869.5 -1.10% -0.19% 0.35% 17.58% Nasdaq Composite 22,807.48 -1.49% -0.42% -1.87% 22.93% 10-year Treasury 4.118 11.00 -6.60 -5.40 -15.80 Gold 5165.9 -0.34% 3.60% 19.24% 76.36% Oil 77.6 18.35% 20.37% 35.17% 16.89% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Traders got briefly excited over an unverified report that the U.S. and Iran could make a deal over Tehran's nuclear ambitions, and Azerbaijan said it has been hit by Iran missiles.
Prices to charter massive oil tankers hauling crude have nearly doubled in recent days.
Broadcom shares $(AVGO)$ are climbing after earnings as the chip maker says AI is not disrupting its software business.
Chip maker Marvell $(MRVL)$ reports earnings after the close.
Berkshire $(BRK.A)$ $(BRK.B)$ CEO Greg Abel is speaking to CNBC at 7 a.m.
Weekly jobless claims, fourth-quarter productivity and import prices are due at 8:30 a.m. Fed Vice Chair for Supervision Michelle Bowman speaks at 1:15 p.m.
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The chart
Jim Bianco of Bianco Research flags a chart on his X account showing the U.S. national average for gasoline prices up 20 cents in the past two days, "the biggest such jump in decades." He then crunched some numbers to figure out what that might do to inflation, looking at the fuel's weight in consumer price inflation and its $3.20 average as of March 3, a 9.2% rise from February's. "The rise in gasoline ALONE could add 0.27% to March CPI if gas prices stay at current levels throughout the rest of March," said Bianco.
Top tickers
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Ticker Security name NVDA Nvidia TSLA Tesla AVGO Broadcom TSM Taiwan Semiconductor Manufacturing GME GameStop PLTR Palantir MSFT Microsoft AMZN Amazon AMD Advanced Micro Devices MU Micron
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BEYOND THE NEWSROOM
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-Barbara Kollmeyer
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March 05, 2026 06:50 ET (11:50 GMT)
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