Why study crashes
Crashes are when the method is tested hardest. Everything falls together, the news is frightening, and every instinct says either "sell everything" or "buy everything, it's cheap". Stage analysis says something calmer: watch how many stocks are rising, and let that number tell you when the tide has turned.
Here are the two sharpest falls in our records, through the share of US stocks in Stage 2.
2020: a healthy market, a crash, then the broadest rally
Three things stand out.
The top gave little warning. At the February 2020 record, more than half of stocks were in Stage 2 and about two-thirds were above their 200-day average. This was not a narrow market hiding weakness. The selling simply arrived all at once.
Breadth bottomed after the index. The S&P 500 made its low on March 23. The share of stocks in Stage 2 kept falling for another two weeks and bottomed in April. Nobody could have called the low on the day from breadth, and nobody needed to.
The turn was unmistakable. Through the late spring and summer, stock after stock based and broke out. By the end of July four in ten stocks were in Stage 2, with the index still a few percent below its old high, and after the first vaccine results in November the share jumped to three in four: one of the broadest markets in our records. The leaders of that recovery were visible early: health care and tech first, the rotation you saw in lesson 4.
2025: a narrow market, a selloff, then an index-led recovery
This time the warning came first. A year before the selloff, in February 2024, almost two in three stocks were in Stage 2 (lesson 3). By the February 2025 record it was about one in three: the index was being carried by fewer names.
Then the fall, and a recovery that looked very different from 2020's. The index made its low on April 8. Breadth kept sliding for more than three weeks and bottomed in early May. The S&P 500 was back at a record by the end of June, but at that point only about a third of stocks were in Stage 2. The market underneath caught up slowly, reaching half only in September.
What the two crashes teach
- Breadth doesn't pick the day. In 2020 it bottomed about two weeks after the index; in 2025, about three and a half weeks after. Neither low could be called in real time.
- A washout is followed by a rush, sometimes. In 2020 the share of stocks in Stage 2 went from almost none to three in four within the year. In 2025 the rush was slower and smaller, and the index led. Both are a description of what buyers were doing, not a prediction.
- Protect first, then rebuild. A stop under the 30-week line took you out early in both falls (lesson 7). Breakouts in a broadening market brought you back in (lesson 6).
The share of stocks in Stage 2, the share above their 200-day average, and the market read, updated after every close.
Questions people ask
How much did the S&P 500 fall in the 2020 Covid crash?
About 34% from its February 19, 2020 record to its March 23 low, on closing prices. In April, fewer than 5 in 100 US stocks were in Stage 2.
How much did the S&P 500 fall in the 2025 tariff selloff?
About 19% from its February 19, 2025 record to its April 8 low, on closing prices. At the worst point for breadth, in early May, about 14 in 100 US stocks were in Stage 2.
Can market breadth tell you the exact bottom?
No. In both falls breadth kept sinking for weeks after the index had bottomed. What breadth does well is show the turn once it has started, with stock after stock entering Stage 2, and show whether a recovery is broad or carried by a few large names.