The S&P’s three-week pullbacks

Recently, the market has arguably been driven in large part by uncertainty surrounding trade policy and its potential to weaken the US economy. While Monday’s sharp sell-off probably didn’t do much to alleviate anxiety about that uncertainty, it provides a departure point for analyzing how the market has  behave in similar circumstances.

Last week marked the S&P 500’s (SPX) first three-week pullback in seven months, and only its fifth of the past two years. Last year included two of them, one ending in early April and the other in early August. After the first episode, the SPX rebounded immediately, while after the second, it fell an additional 4.3% (the following week) before rebounding:

Before last week, the SPX had 171 other three-week pullbacks since 1957—that is, an up week followed by three consecutive down weeks. Here’s what the index did the next week:

1. Fell to a lower weekly low in 119 cases (70% of the time).
2. Ended the week higher in 92 cases (54% of the time).

In other words, the fact that on Monday the SPX fell below last week’s low can’t be viewed as unusual, since that’s what the SPX did seven out of 10 times in the past.

But that’s just scratching the surface. In attempting to gauge the likelihood that this week could close higher than last week, traders may note that of the 119 times the SPX made a lower low the week after a three-week pullback, it ended that week higher in only 48 cases, or 40% of the time.¹

Also, not all of the three-week pullbacks were like the three on this chart, each of which followed multi-week new highs. These downturns occurred after the SPX hit its highest high in at least 12 weeks, something that’s happened only 73 other times since 1957. Here’s what the SPX did after this more unique group of pullbacks:

1. Fell to a lower weekly low in 51 cases (70% of the time).
2. Ended the week higher in 36 cases (49% of the time).

While the SPX fell to a lower low just as often as it did for larger group of pullbacks, it was less likely to end the week higher. Also, of the 51 times the SPX fell to a lower weekly low, it rallied to end the week higher in only 15 cases (29% of the time).

Taken as a whole, these statistics suggests the market may be fighting a slightly uphill battle in its quest to snap its current three-week losing streak. But it’s also important to keep in mind that these are composites of dozens of individual price moves that were driven by different factors and varied widely in size. For example, the SPX’s one-week returns after the three-week pullbacks from 12-week (or longer) highs ranged from +4.1% to -5.9%.

In other words, the SPX’s return this week won’t necessarily resemble its historical average after other three-week pullbacks. It will, however, be shaped by current market forces, including the evolving tariff story and the nature of this week’s inflation data.

Today’s numbers include (all times ET): NFIB Small Business Optimism Index (6 a.m.), JOLTS (10 a.m.).

Today’s earnings include: Ciena (CIEN), Dick's Sporting Goods (DKS), Kohl's (KSS), United Nat Foods (UNFI), Casey's General Stores (CASY).

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¹ All figures reflect S&P 500 weekly prices, 1957-2025. Supporting document available upon request.